Question

Under what circumstances could payback and discounted payback be equal? must be 250 words

Answer 1

Payback period is a method that consider the time period when entire investment would be recovered. it is sum of cash inflow over a period equals to cash outflow. Discounted payback period is a another version of payback period which consider the discounted cash flow at a rate equal to required rate of return. discounted payback period considers the discounted cash flows to calculate the payback period and it is considered as superior method over payback period.

payback period and discounted payback period could be equal only when discount rate is 0%. when discount rate is 0% then discounted value of cash inflow of discounted payback period would be equal to the cash inflow used in calculating the simple payback period and then only it is possible that simple payback period equals to discounted payback period.