The payback method helps firms establish and identify a maximum acceptable payback period that helps in capital budgeting decisions. There are two versions of the payback method: the conventional payback method and the discounted payback method.

Which of the following statements indicates a disadvantage of using the traditional payback period for capital budgeting decisions? Check all that apply.

The traditional payback period is calculated using net income instead of cash flows.

The traditional payback period does not take into account the cash flows produced over a projects entire life.

The traditional payback period does not take into account the time value of money effects of a projects cash flows.