What is the difference between the normal payback technique and the discounted payback technique?
A)The discounted payback is calculated using the future value of cash flows.
B)The normal payback method ignores the time value of money.
C)The normal payback method discounts future cash flows.
D)The discounted payback method ignores the time value of money.

Question

Quizplus · Accepted Answer

The main difference between the normal payback technique and the discounted payback technique is that the normal payback method ignores the time value of money, whereas the discounted payback technique takes into consideration the time value of money by discounting future cash flows to their present value using a discount rate. Therefore, option B is the correct answer. Option A and D are incorrect because they suggest that one method ignores the time value of money, while the other does not, which is not the case. Option C is also incorrect as the normal payback method does not discount future cash flows.

What Is the Difference Between the Normal Payback Technique and the Discounted