Which of the following capital budgeting techniques typically ignores the time value of money?

Question

Quizplus · Accepted Answer

Payback period is the only technique that does not consider the time value of money. It only focuses on the number of years it takes for the initial investment to be recovered. Net present value, internal rate of return, and profitability index all take into account the time value of money, which adjusts for the fact that money today is worth more than the same amount of money in the future, due to inflation and the potential for earning interest or returns.

Which of the Following Capital Budgeting Techniques Typically Ignores the Time