Although the payback method ignores the time value of money,relying solely on this capital budgeting method will always lead to value maximizing decision.

Question

Quizplus · Accepted Answer

Ignoring the time value of money may lead to inaccurate decision making in capital budgeting, as it fails to account for the present value of future cash flows. This can result in selecting a project that appears to have a shorter payback period, but may actually have lower net present value when compared to other alternatives. Therefore, relying solely on the payback method may not always lead to value-maximizing decisions.

Although the Payback Method Ignores the Time Value of Money,relying