Answer (B) is correct . The usual payback formula divides the initial investment by the constant net annual cash inflow. The payback method is unsophisticated in that it ignores the time value of money, but it is widely used because of its simplicity and emphasis on recovery of the initial investment.
Answer (A) is incorrect because The net present value method first discounts the future cash flows to their present value.
Answer (C) is incorrect because The profitability index method divides the present value of the future net cash inflows by the initial investment.
Answer (D) is incorrect because The accounting rate of return divides the annual net income by the average investment in the project.
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