The payback method and the rate of return method are powerful, comprehensive evaluation tools, and would normally be sufficient to make a final investment decision.

Question

Quizplus · Accepted Answer

While both the payback method and rate of return method are useful in evaluating an investment, they do have limitations. They do not take into account the time value of money, inflation, and other factors that could impact the investment's returns over time. As such, it's recommended to use other evaluation tools, such as net present value, internal rate of return, and profitability index, in addition to the payback and rate of return methods to make a more informed final investment decision.

The Payback Method and the Rate of Return Method Are