The correct option is (b) Net present value. Net present value is the method that considers the time value of money for evaluating alternative...
Unlike other methods of capital budgeting, the payback period ignores the time value of money (TVM).
Answer and Explanation: The correct answer is D. payback period approach.
One, NPV considers the time value of money, translating future cash flows into today's dollars. Two, it provides a concrete number that managers can use to easily compare an initial outlay of cash against the present value of the return.
Payback Period A short PB period is preferred as it indicates that the project would "pay for itself" within a smaller time frame. In the following example, the PB period would be three and one-third of a year, or three years and four months. Payback periods are typically used when liquidity presents a major concern.