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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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How to compute discounted payback period?
What is the payback period of the following project? Initial Investment: $50,000 Projected life: 8 years Net cash flows each year: $10,000
Adavntages of using payback period?
advantages of payback period?
Advantage and disadvantage of payback?
There are a few different advantages and disadvantages of payback. Payback can help ensure that there is further action in a case for example.
Distinguish between payback and average rate of return?
Payback is usually a specified amount at a specified time. If money is to be gained at an average rate of return, the amount of the return could fluctuate due to inflation or interest rates.
Why is the NPV method superior to payback method?
How is the method superior to the payback method
Payback period versus discounted payback period versus net present value versus profitability index?
discounted payback period
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.
How is discounted payback period computed?
Payback period = Net Investment Annual cash returns
What is the advantage and disadvantage of discounted payback method?
we only know the disadvantages: The cash flows beyond the payback period are ignored..
What is the difference between payback and vengeance in modern combat black Pegasus?
PAYBACK means you killed a player that killed you, VENGANCE means you kill a player that just killed a teamate.
How to compute discounted payback period?
What is the payback period of the following project? Initial Investment: $50,000 Projected life: 8 years Net cash flows each year: $10,000
What are the disadvantages of the discounted payback period?
It's not a direct measure of a project's contribution to stockholder's wealth. You may reject project's that should be accepted when using the NPV analysis (best method used for determining whether or not a project is accepted in Capital Budgeting). Discounted Payback Period AdvantagesConsiders the time value of money Considers the riskiness of the project's cash flows (through the cost of capital) Disadvantages No concrete decision criteria that indicate whether the investment increases the firm's value Requires an estimate of the cost of capital in order to calculate the payback Ignores cash flows beyond the discounted payback periodYounes Aitouazdi: University of Houston Downtown
What is the difference between a Revolving Fund and a Refund?
A revolving fund is continuously replenished as funds are withdrawn. A refund is a complete repayment, or payback, of a certain amount of money.
What is the difference between the net present value and the discounted cash flow method?
cash method is when you get cash, method is when u give it
How do you calculate discount payback period?
So just a refresher on Discounted Payback Period, it is the time it will take to recover an initial investment for a project given its discounted cash flows. That is, we want Net Present Value greater than 0: the income of the project will be discounted to assess the loss in value due to time (inflation or opportunity cost) to find how long it would take to recover the initially money invested. In the following situation the cash flows are as presented.YearCash Flows ($)0-20001+10002+10003+2000The first step is to calculate the discounted cash flow. Assuming the discount rate is 10%, we would apply the following formula to each cash flow:PV = CF / (1 + r)twhere CF is Cash Flow, r = 10% and t = yearYearCash Flows ($)Discounted Cash FlowAt 10% ($)0-2000-20001+10009092+10008273+20001503The next step is to compute the cumulative discounted cash flow, by summing the discounted cash flow for each year.YearCash Flows ($)Discounted Cash FlowAt 10% ($)Cumulative Discounted Cash Flows ($)0-2000-2000-20001+1000909-19012+1000827-2643+20001503+1239We see that between years 2 and 3 we will recover our initial investment. To calculate specifically when we could see how long it took to recover the 264 remaining by end of year 2 as followed:264/1503 = 0.1756 yearsThus it will take a total of 2.1756 years to recover the initial investment. If the discounted payback period is two years, this project would not be accepted.However if the cut off is any time greater than 2.1756 years the project would be accepted.And that is how you calculate discounted payback period! Apologies if there is any miscalculations, but I double checked it, should be good J.
What is the difference of on sale and for sale?
on sale is discounted price and for sale is the availability to be bought
What is different between Discounted pay back period vs pay back period?
The difference between a discounted pay back period and a pay back period is the amount of money that needs to be paid. During a discounted pay back period a creditor might settle for a lesser amount of money if the debt is paid in full at the discount by a certain date. A pay back period will mean additional funds to be paid including interest.
