A disadvantage of the payback period method of investment analysis is that:

Question

Quizplus · Accepted Answer

The payback period method only considers the time it takes to recover the initial investment and ignores all cash inflows that occur after the payback period. This means that the method does not consider the time value of money or the long-term profitability of an investment, making it a crude measure of investment analysis. Options A and B are not entirely accurate, as the method can be used to calculate risk to some extent, and its simplicity may be considered an advantage by some analysts.

A Disadvantage of the Payback Period Method of Investment Analysis