Question

payback method

Answer 1

payback method :-

1. payback method is one of the capital is one of the capital budgeting techniquest
2. In the payback method we cancanalyseathe periodpin whichwwe can recover investment.
3. PaybackPmethod can be whether discounted payback period or normal Payback period.
4. In the case of normal Payback period we use undiscounted casflows andain the case of discounted Pay back period we use discounted cashflows.
5. Payback period in the case of equal annual cash inflows is equal to (total investment) /annual cashflows.
6. Payback period represented in years.
7. The decision is bsed on number of years in whiwh we can recover investment.
8. If the Payback period is less than or equal to expected Payback period then we can accept the project otherwise not.