Computation of payback period method, Finance Basics

Computation of Payback Period Method

1. Under uniform annual incremental cash inflows - if the venture or an asset generates uniform cash inflows then the payback period (PBP) will be given by:

PBP = Initial cost of the venture/Annual incremental cost

As like whether a venture costs 37,910/= and promises returns of 10,000/= per annum indefinitely then the PBP = 37,910/10,000

= 3.79 years

So in shorter the PBP the more viable the investment and therefore the better the option of that investments.

2. Under non-uniform cash inflows - Under non-uniformity PBP calculation will be in cumulative form and because the net cash inflows are accumulated each year till initial investment is recovered.

Posted Date: 1/30/2013 4:58:57 AM | Location : United States







Related Discussions:- Computation of payback period method, Assignment Help, Ask Question on Computation of payback period method, Get Answer, Expert's Help, Computation of payback period method Discussions

Write discussion on Computation of payback period method
Your posts are moderated
Related Questions
1) What happens to the portfolio standard deviations as the investor substitutes the foreign securities for the U.S securities? What combination of U.S and Japanese stock minimizes

Capital Corporation, which has a target capital structure of 40 percent debt and 60 percent common equity, is evaluating an expansion project with an 8.5 percent IRR. The project c

Central Depository System or C.D.S Its computerized ledger systems which enable the transfer or holding of securities with no necessitate for physical movement.  The shares or

We have 10.000 genes and 4.000 of them are annotated for a certain attribute of interest. a. If we have a single set of 10 genes, how many of them should be annotated to be cons


Explain about the New Issue Market OR Primary Market New issue market is the segment in which new issues are made. In new issue market, new issues may be made in 3 ways name

(i) Find out operating leverage from the following data: Sales                             Rs.50000 Variable Cost               60% Fixed Cost                   Rs.12000

After carefully reading all the available information, prepare a two page (double-spaced) essay and answer the following questions: Assume that we have the following data: C=100+0.

Inventory Management - Supply Chain Management Determination of the best ordering policy in a manufacturing organisation In a manufacturing organisation, procurement may ha

A firm has sales of Rs. 10,00,000. Variable cost is 70%, total cost is Rs.9,00,000 and Debt of Rs. 5,00,000 at 10% rate of interest. If tax rate is 40% calculate: