If the discounted payback method is preferable to the payback method,then why is the payback method ever used?
A)The discounted payback requires an arbitrary cutoff point while payback does not.
B)Payback is easier to compute than discounted payback.
C)Payback considers all of a project's cash flows but discounted payback does not.
D)Payback requires the initial investment be recovered during a project's life while the required discounted payback period may be shorter.
E)Payback can be used with mutually exclusive projects but discounted payback cannot.

Question

Quizplus · Accepted Answer

The payback method is easier to compute than the discounted payback method, which is why it may still be used in some cases. However, it is important to note that the discounted payback method is generally considered a better measure of a project's profitability, as it takes into account the time value of money.

If the Discounted Payback Method Is Preferable to the Payback