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What is the disadvantage of using the payback period

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Reference no: EM133140582

Question - Imagine you are the manager of a business. After calculating the payback period of two different potential investment opportunities, you find the payback periods of both investments are shorter than the payback period required by the business. One investment opportunity's payback period is however shorter than the other.

Required -

1. Which one of the two investment opportunities should you pursue?

2. What is the disadvantage of using the payback period approach to investment appraisal? (That is, in what way might it lead to poor decision-making?)

Reference no: EM133140582

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