Which of the following methods of capital budgeting is based on the concept that it is better to recover the cost of (investment in) a project sooner rather than later?

Question

Quizplus · Accepted Answer

The traditional payback period method is based on the concept that it is better to recover the cost of investment in a project sooner rather than later. This method calculates the amount of time it takes for a project to generate enough cash flows to recover the initial investment. It does not consider the time value of money or the profitability of the project beyond the payback period. Therefore, it is a less accurate method compared to other capital budgeting methods such as NPV or IRR. However, it can be useful in situations where a company has a limited budget and needs to prioritize projects that can quickly recoup their investment.

Which of the Following Methods of Capital Budgeting Is Based