Question: 1. Why is capital budgeting such an important process? Why are capital budgeting errors so costly?
2. What are the disadvantages of using the payback period as a capital-budgeting technique? What are its advantages? Why is it so frequently used?
3. In some countries, the expropriation (seizure) of foreign investments is a common practice. If you were considering an investment in one of these countries, would the use of the payback period criterion seem more reasonable than it otherwise might? Why or why not?