Question

Define the payback method and discuss the advantages and disadvantages? Calculate the payback period using the...

Define the payback method and discuss the advantages and disadvantages? Calculate the payback period using the following information

Year Annual 0 ($100) 1 10
2 60

3 80

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The Payback Period is a technique to analyze the capital budgeting decision making. It calculates the time required to recover the funds invested at the initial stage of the projects which is also known as the initial outlay cost/ Initial Investments, it can also be known as the break-even point.

Advantage:-

1. Simple Technique to use

2. A simple measure of risk; the more time it takes to i.e the longer it takes to pay back, the higher is risk in the project.

Disadvantage:-

1. Its does not consider the time value of money.

2. It does not take into account the cash flow after the payback period.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Discuss the advantages and disadvantages of using the kitchen-sink method for preparing an engagement report
Discuss the advantages and disadvantages of using the kitchen-sink method for preparing an engagement report
1- Discuss the advantages and disadvantages of using antropometric measures in nutritional assessment of populations. 2-...
1- Discuss the advantages and disadvantages of using antropometric measures in nutritional assessment of populations. 2- You are a researcher and asked to carry out a research on a populations’ usual intake of food and its variation over a long period of time. State which dietary survey method you would use to achieve this aim and state fundamentals on the application and uses of this method. You also need to discuss advantages and disadvantages of this specific method of dietary...
Identify and explain any (3) advantages of using the Payback method.
Identify and explain any (3) advantages of using the Payback method.
Calculate payback period and discounted payback period for the following project if the discount rate is...
Calculate payback period and discounted payback period for the following project if the discount rate is 10% The initial outlay or cost for a four-year project is $1,300,000. The respective cash inflows for years 1, 2, 3 and 4 are: $700,000, $500,000,$500,000 and $300,000.
11. The NPV and payback period What information does the payback period provide? A project’s payback...
11. The NPV and payback period What information does the payback period provide? A project’s payback period (PB) indicates the number of years required for a project to recover its initial investment using its operating cash flows. As the theoretical soundness of the conventional (undiscounted) PB technique was criticized, the model was modified to incorporate the time value of money-adjusted operating cash flows to create the discounted payback method. While both payback models continue to reflect faulty ranking criteria, they...
5 Macy's uses the Payback Period method for evaluating its projects. The Payback Period cut-off rule...
5 Macy's uses the Payback Period method for evaluating its projects. The Payback Period cut-off rule is 3 years. Macys is considering the following project: Cash Flow for Year Project A 0 -$75,000 1 $33,000 2 $36,000 3 $19,000 4 $9,000 Required: a) Should macys accept or reject Project A why or why not?
Payback period. Given the cash flow of two projectslong dash—A and Blong dash—and using the payback...
Payback period. Given the cash flow of two projectslong dash—A and Blong dash—and using the payback period decision​ model, which​ project(s) do you accept and which​ project(s) do you reject if you have a 3-year cutoff period for recapturing the initial cash​ outflow? For payback period​ calculations, assume that the cash flow is equally distributed over the year.   Cash Flow A B   Cost ​ $14,000 ​$90,000   Cash flow year 1 ​$7,000 ​$36,000   Cash flow year 2 ​$7,000 ​$27,000   Cash flow...
Consider three mutually exclusive alternatives. The MARR is 10%based on the payback period method, which alternative...
Consider three mutually exclusive alternatives. The MARR is 10%based on the payback period method, which alternative should be selected? Year             X           Y           Z 0                   -$100    -$50      -$50 1                   25          16          21 2                   25          16          21 3                   25          16          21 4                   25          16          21 Consider three mutually exclusive alternatives, each with a 20 year life span and no salvage value. The minimum attractive rate of return is 6%. A                         B                           C Initial Cost                                     $4000                 $8000                           $10,000 Uniform Annual Benefit ($)            410                    ...
7. The NPV and payback period What information does the payback period provide? Suppose Extensive Enterprises’s...
7. The NPV and payback period What information does the payback period provide? Suppose Extensive Enterprises’s CFO is evaluating a project with the following cash inflows. She does not know the project’s initial cost; however, she does know that the project’s regular payback period is 2.5 years. Year Cash Flow Year 1 $325,000 Year 2 $500,000 Year 3 $450,000 Year 4 $450,000 If the project’s weighted average cost of capital (WACC) is 8%, what is its NPV? $367,583 $312,446 $404,341...
Compute the Payback period, NPV, IRR, and PI and give accept/reject decision for the following project....
Compute the Payback period, NPV, IRR, and PI and give accept/reject decision for the following project. The cost of capital is 10 percent. Assume the policy payback period is 3 years. Year Cash Inflow (Outflow) 0 (400) 1 100 2 200 3 200 4 300
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT