The payback period is easy to understand and places a heavy emphasis on liquidity.

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The payback period is a measure of the time it takes for a project to recoup its initial investment. It is easy to understand as it simply calculates the time it takes for the cash inflows to equal the initial cash outflow. Additionally, it places a heavy emphasis on liquidity, as it only considers the time it takes to recoup the initial investment without taking into account any cash flows after that point.

The Payback Period Is Easy to Understand and Places a Heavy