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The payback method is designed to measure the time it takes for an investment to generate cash flows sufficient to recover its initial cost. A significant limitation of this approach is its failure to account for cash flows that occur after the payback period. This means that while the method provides insight into how quickly an investment can be recouped, it disregards any potential returns that could accrue after that point.

As a result, projects with identical payback periods may have drastically different long-term profitability and cash flow potential. This limitation can lead investors or managers to make decisions that overlook more beneficial projects simply because they do not reach payback as quickly, even if they generate superior returns in the future.

Other options have certain shortcomings when compared to the primary limitation of the payback method. For instance, the payback method is generally not considered to require complex calculations, and while it may make simplistic assumptions about cash flows, these assumptions do not impact the basic critique of its failure to consider all cash flows. Additionally, the focus of the payback method leans more towards the recovery time rather than analyzing long-term gains, which is not a limitation inherent to the method itself but more a characteristic of its use.