Neither the payback period nor the IRR capital budgeting method recognizes the time value of money.

Question

Quizplus · Accepted Answer

The statement is false. Both the payback period and IRR method do consider the time value of money. The payback period method takes into account the length of time it takes to recover the initial investment, while the IRR method calculates the rate of return that equates the present value of expected cash flows with the initial investment.

Neither the Payback Period nor the IRR Capital Budgeting Method