What are the two primary drawbacks to the payback period method?

A) Difficult to calculate; ignores time value of money
B) Difficult to calculate; only works for long projects (e.g., 5 years or more)
C) Ignores time value of money; ignores cash flows after payback is reached
D) Only works for long projects; ignores cash flows after payback is reached
E) Difficult to calculate; ignores cash flows after payback is reached

Time Value

The concept that money available now is worth more than the same amount in the future due to its potential earning capacity.

Payback Period

The time required for an investment to generate cash flows sufficient to recoup the original investment cost.

Long Projects

Long projects refer to investments or initiatives with a duration that extends over a long period, often requiring considerable upfront costs and extensive planning.