ECONOMICS

Detailed explanation-1: -Answer and Explanation: The statement is true. The calculation of payback period takes into account all the cash flows of a project, but it does not discount them to the present value (in other words, it does not consider the time value of money).

Detailed explanation-2: -Payback ignores the time value of money. Payback ignores cash flows beyond the payback period, thereby ignoring the “profitability” of a project. To calculate a more exact payback period: Payback Period = Amount to be Invested/Estimated Annual Net Cash Flow.

Detailed explanation-3: -The payback period is a simple calculation of time for the initial investment to return. It ignores the time value of money. All other techniques of capital budgeting consider the concept of the time value of money.

Detailed explanation-4: -Detailed Solution. Explanation: The payback method simply projects incoming cash flows from a given project and identifies the break-even point between profit and paying back invested money for a given process. Explanation: The payback period refers to the amount of time it takes to recover the cost of an investment.