--%>
Assignment Help - homework help

Explain computing of payback period

How do we compute the payback period for proposed capital budgeting project? What are the basic criticisms of the payback method?
We compute the payback period for proposed project through adding a project's positive cash flows, one period at time, till the sum equals the initial investment. The number of time periods it takes to cover up this investment is the payback period. The basic criticisms of the payback method are that cash flows after the payback period are avoided and the time value of money is not assumed.

   Related Questions in Finance Basics

  • Q : 222 what do you understand by planning

    what do you understand by planning premises

    		•
  • Q : Define Bill Bill : It is a draft of

    Bill: It is a draft of proposed law represented to the Legislature for performance. (A bill has bigger legal formality and standing than a resolution.) OR An invoice, or document statement, of an amount owing for s

    		•
  • Q : Production at a point outside the

    Normal 0 false false

  • Q : Why do businesses spend efforts to

    Why do businesses spend effort, time and money to generate forecasts?  Describe.Businesses succeed or fail based on how well prepared they are to deal along with the situations they confront in the future. Hence they expend considerable sum

    		•
  • Q : Describe most conservative capital

    Describe most conservative type of working capital financing plan a company could implement? clarify. An all equity capital structure would be the most conservative kind of working capital financing plan approach. The more long-term financing

    		•
  • Q : Biometrics in banking operations

    Biometrics is one kind of technology that can be used to control these kinds of fraudulent practices. May be it is the system which cannot completely stop the practices but yes at least it is the way which can reduce it to the barest minimum. The conv

    		•
  • Q : How does preemptive right secure

    How does a preemptive right secure the interests of present stockholders? A preemptive right secure the interests of existing stockholders through giving them the chance to preempt other investors into the purchase of new shares. If these right

    		•
  • Q : Define Sponsor Sponsor : It is an

    Sponsor: It is an individual, group, or organization which initiates or brings to a Legislator's attention a proposed law modification.

    		•
  • Q : Define Special Funds Special Funds :

    Special Funds: For legal base budgeting purposes, funds produced by statute, or administratively per Government Code Section 13306, employed to budget and account for taxes, licenses, and fees which are restricted by law for specific activities of the

    		•
  • Q : Investors prospects of growth Why might

    Why might investors overestimate the prospects of growth companies and underestimate value companies?

    		•