The payback method of capital budgeting approach to an investment decision ________.
A) considers cash flows over the life of the investment
B) highlights liquidity of the investment
C) considers time value of money
D) ignores the initial investment

Question

Quizplus · Accepted Answer

The payback method of capital budgeting approach only considers the length of time it would take to recover the initial investment, ignoring cash flows beyond that point, the time value of money, and any potential profitability of the investment. It's used primarily to assess the liquidity of the investment, making option B the best choice.

The Payback Method of Capital Budgeting Approach to an Investment