Final answer:
The statement in the question is False.
Step-by-step explanation:
The payback rule does not ignore all cash flows after the cut-off date. It only considers the cash flows occurring before the cut-off date.
The payback rule is a simple capital budgeting technique used to assess the time it takes for an investment to recover its initial cost. The cut-off date is the predetermined period within which the investment is expected to be repaid. The rule compares the investment's cash flows to the cut-off date and stops counting the cash flows once the initial investment is recovered. Any cash flows after that are ignored.
For example, let's say you invest $10,000 in a project with annual net cash flows of $2,000. If the cut-off date is set at 5 years, the payback period will be 5 years since it takes 5 years for the annual net cash flows to sum up to $10,000 (the initial investment). Any net cash flows occurring after the 5-year mark are ignored for the payback calculation.