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What is the advantage and disadvantage of discounted payback method?
Wiki User
∙ 14y ago
we only know the disadvantages: The cash flows beyond the payback period are ignored..
Wiki User
∙ 14y ago
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Discounted payback method?
A discounted payback method is a formula that is used to calculate how long to recoup investments based on the discounted cash flows of the investment. It is a variation of payback period or the time it takes to recover a project investment given the discounted cash flow it has.
What is the difference between payback and discounted payback?
Simple payback method do not care about the time-value of money principle while discounted payback period do take care of this principle in calculation.
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What are the weaknesses of the payback method?
the payback method ... is a method to evaluate the project in capital budgeting ... or simply in a long term dicision making for the entity .and because it is a long term in nature ..... the risk is high ... by evaluatining methods ... we try to reduce the uncertinity ... one of the methods ...is payback method . the disadvantage of the payback method is ...it does not concern with the time value of money theory ....the second one is ...it ignore the incash flow and the outcash flow of the project , after the payback period .
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Is it true that One advantage of the payback method for evaluating potential investments is that it provides information about a project's liquidity and risk?
true
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