Final answer:
The 'payback method' is a simple investment analysis tool used to determine the time needed to recover the initial costs of an investment. It ignores cash flows beyond the payback period and does not take into account the time value of money.
Step-by-step explanation:
The student's question pertains to the payback method, which is an investment analysis technique. In business decision-making, the payback method is used to determine the duration it takes for an investment to recuperate its initial cost through the savings it generates. A simple payback time calculation does not incorporate the time value of money and overlooks the benefits and costs that occur after the investment has paid for itself (ignores cash flows beyond the payback period). When considering additional insulation, it is essential to compute how long the energy cost savings will take to cover the cost of the extra insulation. The question provided includes details necessary for this calculation: the energy costs, the cost of insulation per square meter, and the average temperature difference (ΔT) during the heating season.