How do we calculate the payback period, Financial Management

Assignment Help:

How do we calculate the payback period for a proposed capital budgeting project? What are the major criticisms of the payback method?

We compute the payback period for a proposed project through adding a project’s positive cash flows, one period at a time, till the sum equals the basic investment. The figure of time periods it takes to cover this investment is the payback period.The major criticisms of the payback method are that cash flows later than the payback period are ignored and the time value of money is not considered.


Related Discussions:- How do we calculate the payback period

Accounting or average rate of return , I need a report on Accounting or Ave...

I need a report on Accounting or Average Rate of Return. Can you please assist me for Accounting or Average Rate of Return report for about 2500 words?

Common size and index analysis, sk company had the following balance sheets...

sk company had the following balance sheets and income statements over the last 3 years

What is the function of dividend policy decision, Q. What is the function o...

Q. What is the function of Dividend policy decision? Dividend policy decision: the third major decision of the financial management of the decision related to the dividend poli

Ratchet bonds, The coupon rate of these types of bonds is adjusted pe...

The coupon rate of these types of bonds is adjusted periodically at a fixed margin over a reference rate. It can be adjusted southward only and once it is adjuste

Abnormal earnings valuation model, A technique for knowing a company's wort...

A technique for knowing a company's worth that is based on earnings and book value. It is also known as the residual income model, it seems at whether management's decisions cause

Explain about money markets by maturity of the securities, Explain about mo...

Explain about money markets by maturity of the securities. On the basis of the maturity of the securities traded, money markets can be introduced here: Money markets are financ

Determination of spread, Determination of spread Daily interest rate = ...

Determination of spread Daily interest rate = 5.11/ 365 = 0.014% per day Variance of cash flows = 1000 × 1000 = $1000000 per day Transaction cost = $18 per transaction

Payback period, Payback Period It is an amount of time, mainly measured...

Payback Period It is an amount of time, mainly measured in years; it takes previously the undiscounted cash inflows from a project equal the cash outflow. It indicates the leng

State the term- overtrading, State the term- Overtrading Overtrading ta...

State the term- Overtrading Overtrading takes place when a company has insufficient finance for working capital to support its level of trading. The  company  is  growing  rapi

The oasis report, The Oasis Report Amidst all these problems, the Minis...

The Oasis Report Amidst all these problems, the Ministry of Social Justice and Empowerment constituted a committee with a view to improve old-age social security in the country

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd