The payback method is not really a theoretically correct approach.

Question

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The payback method is not considered a theoretically correct approach for analyzing investment decisions because it does not consider the time value of money, inflation, and long-term profitability. It only focuses on the payback period without taking into account the profitability or risk associated with the investment. Therefore, it is often criticized by financial experts and not preferred as the sole basis for investment decisions.

The Payback Method Is Not Really a Theoretically Correct Approach