Payback is considered an unsophisticated capital budgeting because it
A) gives explicit consideration to the timing of cash flows and therefore the time value of money.
B) gives explicit consideration to the timing of cash flows and therefore the time value of money
C) none of the above.
D) gives explicit consideration to risk exposure due to the use of the cost of capital as a discount rate.

Question

Quizplus · Accepted Answer

The payback method is considered unsophisticated because it does not give explicit consideration to the timing of cash flows and the time value of money, nor does it consider risk exposure through the use of a discount rate.

Payback Is Considered an Unsophisticated Capital Budgeting Because It