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Why is payback often used as the sole method of analyzing a proposed small project?

Why is payback often used as the sole method of analyzing a proposed small project?
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Answer #1

Payback period is one the simplest methods of analysing project feasibility. When testing feasibility of a small project where profit and loss are not calculation intensive, it can be used for analysis. It is so because small values are not affected by time value much and rather than spending time and resources to analyse for a small project, it can be further utilized for some contructive work that would add up to the value of the firm.
Also small projects may have a small period life, so payback leads to a similar accep tor reject decision as IRR or NPV analysis

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