Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
merits and shortcomings of using the payback period for capital budgeting decisions
Expert Solution
Introduction
There are many budgeting options available when it comes to running a business and maximizing finances. Because budgets and resources are always restricted, managers must make tough decisions about whether investments are worthwhile and how long they will take. The "payback period technique" is a means for a business to figure out how much cash flow will come in from several initiatives and which one will have the quickest return on original investment, or "payback period."
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