Payback Period with Uneven Cash Flows

Related BrainMass Solutions

• Payback Methods, Even and Uneven Cash Flows

  Using linear interpolation, a more precise measure is that payback happens at: 5 years + Discounted Payback Period with uneven cash flows: Year Cash Revenues Fixed Costs Variable Costs Net Cash Inflows Disc Factor (12%) Discounted Cash Savings

• Capital Budgeting Decisions with uneven cash flows

  20578 Capital Budgeting Decisions with uneven cash flows: Southern Cola. Calculate Net present value, Payback period, Internal rate of return, Accrual accounting rate of return based on net initial investment.

• Payback, NPV, IRR

  When cash inflows are uneven, we need to calculate the cumulative net cash flow for each period and then use the following formula for payback period: Payback period = A + (B/C) Where, A is the last period with a negative cumulative cash flow;

• Payback period, NPV, IRR

  (principles of accounting, 2008) If an investment involves uneven cash flows, the computation requires scheduling cash inflows and outflows. Hence payback period is the duration in which initial investments are recovered.

• The President of EEC recently called a meeting

  It considers the present values of the cash flows and discounts the cash flows. Thus, it is different from the payback period method because it does not consider the present value of the flows.

• Capital budgeting part of a long-term strategic planning

  (principles of accounting, 2008) If an investment involves uneven cash flows, the computation requires scheduling cash inflows and outflows. Hence payback period is the duration in which initial investments are recovered.

• Capital Budgeting Technique Effects: NPV, IRR, & Simple Payback

  The present value of each of the cash flows was computed by multiplying the cash flow column with the present value column.

• Unequal cash flows affect the future value of an investment

  An example of how uneven cash flows affect future value of investment is; An investment has uneven cash flows of $ 500, $ 300, $ 400, $ 250 and $ 750 and has an interest rate of 9% over a period of 5 years.

• What are major areas of risk in financial management? How might the company adjust for projects of differing risk in the approval process?

  Now, if a company uses payback period instead in evaluating capital projects, then it may want to consider using the present values of cash flows in computing for the payback period rather than just the plain cash flows.