A drawback in using the payback approach to capital budgeting decisions is
A)it doesn't account for the time value of money.
B)it ignores cash flows beyond the payback period.
C)it doesn't adjust for differences in the stream of cash flows.
D)All of the above

Question

Quizplus · Accepted Answer

The payback approach to capital budgeting decisions does not take into account the time value of money, ignores cash flows beyond the payback period, and does not adjust for differences in the stream of cash flows. Therefore, all of the above options are drawbacks of using the payback approach.

A Drawback in Using the Payback Approach to Capital Budgeting