For what reason are the net present value and internal rate of return methods of capital budgeting superior to the payback method?

A) Both the methods are easier to implement.
B) Both the methods reflect the effects of depreciation and income taxes.
C) Both the methods consider the time value of money.
D) Both the methods require less input.

Net Present Value

A financial metric used to evaluate the profitability of an investment or project, calculated by subtracting the initial investment from the present value of future cash flows.

Internal Rate Of Return

The discount rate at which the net present value of an investment project is zero; the rate of return promised by a project over its useful life.

Discount Rate

The rate of interest employed to calculate today's value of anticipated future cash streams in discounted cash flow evaluation.