Pay back period (pbp) , Financial Management

Pay Back Period (PBP) :

This is the most popular method employed by industrial practitioners for ranking investment projects. This is described as the "period required for a proposal's initial cash outlay to be recovered by future additional cash savings generated from the proposal". The cash flow (after tax & depreciation) is used in calculating the payback period.

PBP = CO/CF

Where CO = cash outflow of the project and  CF = cash inflow

When the cash gains produced by the project are unevenly distributed, cumulative cash gains resulting from the project are to be calculated until the year in which the running total is similar to the amount of investment outlay.

Posted Date: 10/15/2012 9:15:33 AM | Location : United States







Related Discussions:- Pay back period (pbp) , Assignment Help, Ask Question on Pay back period (pbp) , Get Answer, Expert's Help, Pay back period (pbp) Discussions

Write discussion on Pay back period (pbp)
Your posts are moderated
Related Questions
Financial intermediaries Financial intermediaries are significant to the efficient functioning of the financial markets as they act to bring the borrowers/companies and lenders

Tri-City Industries is considering two possible capital projects. Project A requires an initial investment of $240,000 and provides cash flows before tax of $120,000 in year one, $

Explain why accounting profits and cash flows are not the same thing. Ans: Stock value relies on future cash flows, their timing, and their riskiness.  Profit calculations do n

Normally, floater coupon rate moves in the same direction as the reference rate. That is, with an increase in the reference rate, the floater coupon rate also increases


Hedging Using Commodity Futures Producers of agricultural commodities are faced with price risk and production risk over a period of time and within a marketing year. In case o

Describe the benefits of Wealth maximisation criterion Value of an asset must be viewed in terms of the benefits it can produce. Worth of a course of action can similarly be ju

Q. Working capital cycle? In a manufacturing concern the working capital cycle is start with the purchase of the raw material and ends with the realization of the cash from the

What is trustworthy collateral from the lenders' perspective?  Explain whether accounts receivable and inventory are trustworthy collateral. Assets which are readily marketable

Mergers and Acquisitions It is a Process of business combination. There are 3 forms of business combination: 1. M1.    M1 has the highest liquidity. This is the narrowest t