Disadvantages of payback period, Finance Basics

Assignment Help:

Disadvantages of Payback Period

1. Does not receive into account time value of money and supposes that a shilling obtained in the 1st year and in the Nth year have the similar value so like to rank them simultaneously to ascertain the PBP that is unrealistic given such a shilling now is valuable rather than a shilling N years from currently.

2. PBP procedure does not measure the profitability of a venture however quite measures the period of time a venture obtains to pay back the cost.  The procedure is outside looking or lender oriented quite than owner oriented.

3. PBP procedure ignores inflows after PBP and like, it does not accommodate the factor of return to an investment.

4. This procedure will not have any type of impact on the company's share prices as profitability that is one of the most significant factors in gauging the company's value of shares is not a function of PBP and like the procedure fall short of meeting the criteria of investment appraisal.


Related Discussions:- Disadvantages of payback period

Proforma balance sheet, Proforma Balance Sheet This refers to the proj...

Proforma Balance Sheet This refers to the projected balance sheet at the finish of forecasting period.  The items in the proforma balance that vary with sales would be determi

Should the short-run effects on eps influence the ch, A firm has a $100 mil...

A firm has a $100 million capital budget. It is considering two project, each costing $100 million. Project A has an IRR of 20%; has an NPV of $9 million; and will be terminated af

Student, evaluate the importance of leverage in financial management of a s...

evaluate the importance of leverage in financial management of a small scale company

Stock exchange index or sei, Stock Exchange Index or SEI Stock Exchang...

Stock Exchange Index or SEI Stock Exchange Index is a measure of relative changes in prices of stocks from one duration to another index. Nairobi Stock Exchange twenty (20) -

Broker - stock market, Broker - Stock Market 1. A dealer on the ...

Broker - Stock Market 1. A dealer on the market who that sells and buys securities on behalf of the public investors. 2. And he is an agent of investors 3. He is t

What are the types of money and bank regulations, What are the types of Mon...

What are the types of Money and Bank Regulations? Types of Money : a. Commodity money b. A commodity-backed money c. Fiat money Bank Regulations: a. Deposit i

Explain the term - giving margin money to broker, Explain the Giving Margi...

Explain the Giving Margin Money to Broker Marin  is  the  amount  of  money  which is provided  by customer to the brokers who have agreed to trade their securities. It may

Foundation of Building Wealth, I am struggling with a PowerPoint Presentati...

I am struggling with a PowerPoint Presentation 8-10 slide the calculations and understanding Traditional IRAs and Roth IRAs, I guess that I need to prepare this for an audience. Sh

Commercial bank for short term loans, Commercial Bank for Short Term Loans ...

Commercial Bank for Short Term Loans Purpose Why Commercial Banks Prefer To Lend Short Term Loans a) Long-term forecasts are not only difficult although also vague as unc

Compound interest and compound amount.., a debt off Rs1000 with interest at...

a debt off Rs1000 with interest at 10% compounded quarterly will be repaid by payments Rs. 200 at the end of 3 months and three equal payments at the end of 6 9 and 12 months. find

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