The payback method is the most thorough and comprehensive way to choose the best investment in comparison to other capital budgeting methods.

Question

Quizplus · Accepted Answer

The payback method is a simple and quick method of capital budgeting that only considers the time it takes to recover the initial investment. It does not take into account the overall profitability or time value of money, making it less comprehensive than other methods like net present value (NPV) or internal rate of return (IRR). These methods consider both the initial investment and expected future cash flows to determine the profitability and the best investment option. Therefore, the payback method is not the most thorough and comprehensive way to choose the best investment in comparison to other capital budgeting methods.

The Payback Method Is the Most Thorough and Comprehensive Way