I feel that the payback method would be the most useful to make generic business decisions. The payback method has some flaws but it is great to help narrow down what projects have the most bang for the buck. I could see myself using it if a friend approached me to invest in their small business. I would be able to determine how much cash I was going to invest and divide that by the after tax benefit annually to determine how many years it would take to recoup my investment. As an investor this is a great way to generalize if it would be a good investment. As the business owner the payback method does not consider the time value of money (Woodruff, 2019). This means that if a project’s return in investment is not standard from year to year then it might be harder to determine if one project is better than another project. Some capital investments bring in more money in the first few years and then fades out where other capital investments take a few years to bring in major gains. Both of these can be beneficial in their own ways. However the payback method will not always give you a clear answer as the business owner.
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