How do we calculate the payback period, Financial Management

Assignment Help:

How do we calculate the payback period for a proposed capital budgeting project? What are the major criticisms of the payback method?

We compute the payback period for a proposed project through adding a project’s positive cash flows, one period at a time, till the sum equals the basic investment. The figure of time periods it takes to cover this investment is the payback period.The major criticisms of the payback method are that cash flows later than the payback period are ignored and the time value of money is not considered.


Related Discussions:- How do we calculate the payback period

London interbank offered rate (libor), London Interbank Offered Rate (LIBOR...

London Interbank Offered Rate (LIBOR) This is the base lending rate which is charged by banks in the London Eurocurrency market. LIBOR is the European equivalent of the U.S. pr

What do you signify by cash, Q. What do you signify by Cash? Cash :- Fo...

Q. What do you signify by Cash? Cash :- For the motive of cash management the term cash not only includes cheques, bank drafts, coins, currency, notes, demand deposits with ban

Credit spreads and the valuation of non-treasury securities, It is not easy...

It is not easy to determine the theoretical value of non-treasury securities. However, we can use the treasury spot rate for the valuation of non-treasury security.

Regular versus special redemption prices, The call prices for vario...

The call prices for various issues mentioned above are known as regular redemption prices. Point to be noted is that the regular redemption prices are above

Callable bonds and puttable bonds, Convertible bonds can be classified into...

Convertible bonds can be classified into different types such as callable bonds and puttable bonds. These bonds are discussed as follows: Basics of Callable Bonds A callabl

Why do analysts calculate financial ratios, Why do analysts calculate finan...

Why do analysts calculate financial ratios? Ratios are comparative measures.  For the reason that the ratios show relative value, they permit financial analysts to compare inf

Agency mortgage-backed securities, Agency Mortgage-Backed Securities ...

Agency Mortgage-Backed Securities (AMBS) are securities that are backed by the mortgage loans. These securities include mortgage passthrough securities, stripped

Theories of the term structure, There are two important term structur...

There are two important term structure theories related to the shapes of the yield curve. First is the Expectations Theory and the second is Market Segmentations

Securities, Calculate the expected rate of return and risk of return

Calculate the expected rate of return and risk of return

Explain about the working capital management, Explain about the Working Cap...

Explain about the Working Capital Management Working Capital Management is concerned with the management of current assets. It's a significant and integral part of financial m

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