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advantages of payback period?
The payback period is easy to use, compute and it does give a certain amount of information concerning risk. The disadvantages though include the fact that it ignores the profability of an investment and it does not take into account time value of money (TVM). Amber
It's not a direct measure of a project's contribution to stockholder's wealth. You may reject project's that should be accepted when using the NPV analysis (best method used for determining whether or not a project is accepted in Capital Budgeting). Discounted Payback Period AdvantagesConsiders the time value of money Considers the riskiness of the project's cash flows (through the cost of capital) Disadvantages No concrete decision criteria that indicate whether the investment increases the firm's value Requires an estimate of the cost of capital in order to calculate the payback Ignores cash flows beyond the discounted payback periodYounes Aitouazdi: University of Houston Downtown
limited number of discounted seats
limited number of discounted seats
limited number of discounted seats
limited number of discounted seats
limited number of discounted seats
limited number of discounted seats
limited number of discounted seats
limited number of discounted seats
limited number of discounted seats