Final answer:
Except for recognizing cash flows after the payback period, the other reasons like measuring risk exposure and considering the timing of cash flows, along with being easy to calculate, are why firms use the payback period in capital investment decisions.
Step-by-step explanation:
The question pertains to the concept of the payback period in capital budgeting decisions, which is the duration required for an investment to generate cash flows sufficient to recover its initial cost. Among the options provided, all except "B) It recognizes cash flows that occur after the payback period." are reasons why firms use the payback period. The payback period indeed measures risk exposure (A), since a shorter payback period is considered less risky, and implicitly considers the timing of cash flows (C), because it focuses on how quickly an investment can be recovered. However, it does not account for cash flows after the break-even point, which is a major limitation of the payback period method.