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The payback technique estimates the time required to "payback" or repays the initial expenditure
In capital planning, the term "payback period" describes the amount of time needed to recover investment costs or to break even. The payback period would be two years, for instance, if an investment of $1,000 was made at the beginning of year one and returned $500 at the conclusion of year one and year two, respectively.
The payback technique estimates the time required to "payback" or repays the initial expenditure. The time it takes to generate enough cash revenues from an investment to cover the cash outflow(s) for the investment is known as the payback period, which is commonly expressed in years.
Therefore, the correct answer is option
b) does not consider the time value of money
c) is not a true measure of investment profitability
e) ignores all cash flows that occur after the payback period
The complete question is:
Select all that apply
The payback method ______.
a) cannot evaluate projects with uneven cash flows
b) does not consider the time value of money
c) is not a true measure of investment profitability
d) does not consider how quickly an investment is recovered
e) ignores all cash flows that occur after the payback period
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