Purchase Solution

Payback Method

Not what you're looking for?

Ask Custom Question

A project has a cost (projected outflow of ($14,000) in year 0.

This project has the following projected inflows in years 1-5:

year 1 $ 2,000
year 2 $ 4,000
year 3 $ 7,000
year 4 $ 7,000
year 5 $ 7,000.

When is the pay back? (year / months)___________________

If this firm has a payback policy of 3 years, will this project meet that criteria?_____________

Purchase this Solution
Solution Summary

Payback Method is utilized in the solution.

Solution Preview

Under the Payback Method, we compute the amount of time required for an investment to generate cash inflows sufficient to recover its initial cost. Based on this method, an investment is acceptable if its calculated payback period is less than some prespecified number of years. ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

View More Free Quizzes
Related BrainMass Solutions

  • Basic Capital Budgeting

    --The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem.

  • 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?

  • Capital Budgeting

    312458 Regular Payback Method; Discounted Payback Method, NPV, WACC, Mutually Exclusive Project What are the three potential flaws with the regular payback method? Does the discounted payback method correct all three flaws? Explain.

  • Disadvantages of Cash Payback Method

    640454 Disadvantages of Cash Payback Method Discuss the principal objections to the use of the cash payback method for evaluating capital investment proposals.

  • Payback Method

    Using the payback method, determine which project the manager should choose. Payback method is simply how long it will take to pay back the initial outlay. The payback method does not use any present value in the calculation.

  • Under the payback method, which investment should be chosen?

    Under the payback method, which investment should be chosen? b. Why do other methods allow for a better analysis? Payback is the time taken to recover the initial investment. Under payback method we choose the investment with a shorter payback.

  • This posting addresses the Payback Period Ratio

    Under the payback period method, it does not indicate risk at all.

  • Discounted payback method

    278802 Which one of the following statements about the discounted payback method is true? Which one of the following statements about the discounted payback method is true?

  • Dino Corporation

    100559 Payback Method and Net Present Value Method Dino Corporation is trying to decide which of five investment opportunities it should undertake. The company's cost of capital is 16%.

  • Payback method investments

    623652 Payback method investments Describe the payback method and explain the pros and cons of its use as a decisionmaking technique.

View More Related Solutions