Evaluating the Limitations of Payback Periods as an Investment Appraisal Measure

The video tutorial discusses the investment appraisal measure of payback periods, highlighting its focus on the timing of cash flows rather than profitability. Through a comparison of two projects, it illustrates how payback periods can lead to short-term investment decisions, potentially overlooking more profitable long-term opportunities. The tutorial emphasizes the importance of considering both advantages and disadvantages of payback periods in investment decisions.

Discuss the importance of considering profitability in addition to the payback period when evaluating investment projects.

How can the payback period approach potentially overlook lucrative long-term investments?

What are some advantages of using the payback period as an investment appraisal measure?