Purchase Solution

Payback period

Not what you're looking for?

Ask Custom Question

What is the payback period method in accounting?

Purchase this Solution
Solution Summary

Payback period is discussed.

Solution Preview

Payback Period: The payback period is simply the time taken by the project to return the initial investment. The measure is very popular and is widely used; it is also a flawed and unreliable measure.

Calculation:
The cash flows from each year are added to find out the point in time at which the cumulative cash flows equal the initial investment.

Thus suppose the initial investment is $400 million. The cash flow in the years 1,2,3 and 4 are $15 million, $ 200 million , $ 250 million and $ 50 ...

Purchase this Solution
Free BrainMass Quizzes
Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

View More Free Quizzes
Related BrainMass Solutions

  • Use of the Payback Period

    The payback period could be used to determine the payback period in various industry groupings.

  • Payback Period Methid and Discounted Payback Method

    12989 Payback Period Methid and Discounted Payback Method What are the differences between the payback period method and the discounted payback method? Which method is better in valuating investments?

  • Disadvantages of Cash Payback Method

    Payback period for project A is $3,000/ $1,000 = 3 years Payback period for project B is $2,000/ $800 = 2.5 years According to the cash payback method, project B is superior (payback period of 2.5 years against a payback period of 3 years for project

  • Payback and Net Present Value Methods for Dino Corporation

    Payback period = Initial investment/Expected return per year Investment A Payback period = 100,000/30,000 = 3.33 years Investment B Payback period = 50,000/25,000 = 2 years Investment C Payback period = 30,000/8,000 = 3.75 years Investment

  • Payback Period

    4 16,000 26,000 =2 + 5000 / 15000 5 30,000 56,000 56000 Payback period= 2.33 years Answer: Payback period Investment A: 4 years Investment B: 2.33 years Based on Payback criteria Investment

  • Dino Corporation

    Payback period = Initial investment/cash flow per year Investment A Payback period = 100,000/30,000 = 3.33 years Investment B Payback period = 50,000/25,000 = 2 years Investment C Payback period = 30,000/8,000 = 3.75 years Investment D

  • Payback period

    Yes the company should accept the project as the payback period of the project is less than the maximum payback period acceptable The expert determines the payback period for the project.

  • This posting addresses the Payback Period Ratio

    the payback period has ended.

  • Payback Period

    What is the project's simple, regular payback? Payback period is the period in which the initial investments of the project is recovered.

View More Related Solutions