Computation of payback period method, Finance Basics

Assignment Help:

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.


Related Discussions:- Computation of payback period method

Market is in equilibrium, You are taking an investment in the common stock ...

You are taking an investment in the common stock of Crisp's Cookware. The stock is expected to pay a dividend of $2.00 a share at the end of the year (D1=2.00). The stock has a bet

Computation of weights or proportions, Computation of Weights or Proportion...

Computation of Weights or Proportions In computation of the weights or proportions of different capital components, the following values might be used like as: Mar

Valuation of share, Valuation of Share A number of parties are interes...

Valuation of Share A number of parties are interested however in the value of shares and securities and that will include: Company shareholders, vendors and directors of

Methods or techniques of financial forecasting, Methods or Techniques of Fi...

Methods or Techniques of Financial Forecasting 1. Use of Cash Budgets A cash budget is a financial statement showing as: a) Sources of capital and revenue cash inflows

Debentures and bonds, how can debentures be explained in class in term of g...

how can debentures be explained in class in term of game, role play etc....?

Profitability ratio, Profitability Ratio These ratios signify the perf...

Profitability Ratio These ratios signify the performance of the firm in relation to its capability to derive returns or profit from investment or from sale of goods that is pr

Income statement-balance sheet and cash flow, Looking at the income stateme...

Looking at the income statement, balance sheet and cash flow statement of the company and relating it with the non financial factors, I have the important observations as below:-

Determine eps and dfl, The operating profit (EBIT) of ABC Ltd is Rs. 1,60,0...

The operating profit (EBIT) of ABC Ltd is Rs. 1,60,000. Its capital structure consists of the following: 10% Debentures Rs. 500000 12% Preference Shares 1

Required Return.., Valuing Preferred Stock Gest, Inc has an issue of prefer...

Valuing Preferred Stock Gest, Inc has an issue of preferred stock outstanding that pays a $4.50 dividend every year in perpetuity. If this issue currently sells for for $79.85 per

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd