Question

Brief literature review on payback period and includes its merits and demerits

Brief literature review on payback period and includes its merits and demerits

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution : -

Payback Period Is just a method of Capital Budgeting which is used to Compare Projects . Payback Period is just a length of time required to recover the initial investment with the Profits of the Project

Payback Period = Initial Investment / Cash flow every year

Merits of Payback Period :-

Payback Period is very easy to Calculate and easy to understand by others

Payback Period is easy way to Compare projects and Choose the project that has the shortest payback time.

Demerits of Payback Period :-

Payback Period does not include or Consider the time value of money .

Payback period ignores the Profitability of Project

If there is any doubt please ask in comments

Thank you please rate

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
- Brief literature review on NPV and includes its merits and demerits.
- Brief literature review on NPV and includes its merits and demerits.
Discuss green procurement and give its merits and demerits. Cite examples of green procurement in Ghana's...
Discuss green procurement and give its merits and demerits. Cite examples of green procurement in Ghana's public sector
A brief review of the U.S.' historical efforts to secure its borders
A brief review of the U.S.' historical efforts to secure its borders
Explain the payback period model and its two significant weaknesses. How does the discounted payback period...
Explain the payback period model and its two significant weaknesses. How does the discounted payback period model addresses one of the problems?
How do I write a review of Literature on substance abuse. Its my first time and...
How do I write a review of Literature on substance abuse. Its my first time and I'm having problems getting started
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?
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...
the payback period method has been criticised for not taking the time value of money into...
the payback period method has been criticised for not taking the time value of money into account. In modern finance, time value of money concepts play a central role in decision support and planning since the money to be received or paid at some time in the future should be treated as having less value, today, than an equal amount actually received or paid today. Could this limitation be overcome in payback period method? If so, would this method then...
Calculate the payback period of the following project: The required initial investment is $322,990 and its...
Calculate the payback period of the following project: The required initial investment is $322,990 and its expected life is 7 years. Expected annual net operating income from the project is $28,100, including depreciation of $42,270. At the end of the project, the salvage value of the assets is expected to be $27,100. (Ignore income taxes.): Required: The payback period is: (Round your answer to 2 decimal places.)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT