The internal rate of return and the net present value methods for making capital budgeting decisions are superior to the payback method because they:

Question

Quizplus · Accepted Answer

The internal rate of return and net present value methods consider the time value of money, which is a crucial factor in making capital budgeting decisions. The payback method only looks at how long it takes to recover the initial investment and does not take into account the time value of money. Therefore, the internal rate of return and net present value methods are superior to the payback method. Options A, B, and D are incorrect because they do not accurately describe the differences between the three methods.

The Internal Rate of Return and the Net Present Value