Explore BrainMass
Share

Explore BrainMass

    Payback Period Methid and Discounted Payback Method

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What are the differences between the payback period method and the discounted payback method? Which method is better in valuating investments?

    © BrainMass Inc. brainmass.com October 9, 2019, 3:46 pm ad1c9bdddf
    https://brainmass.com/business/the-time-value-of-money/payback-period-methid-discounted-payback-method-12989

    Solution Preview

    The Payback Period:

    The payback period method is an investment valuation model that is based on a management or shareholders' decision that sets the required cut-off period for a project to be considered acceptable. For example, a company that invests $5 million in a project may set a cut-off period of 3 years, which means that the initial investment of $5 million must be paid back by the project's cash flows within 3 years. If the amount is not paid back before this cut-off period, the project is considered ...

    Solution Summary

    This solution discusses the differences between the payback period method and the discounted payback method.

    $2.19