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Initial Net Investment / (Annual expected cash flow + salvage value)

Q: How do you calculate payback period using bail-out method?

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assets value $200000and number of year five cash flow is 70000,80000, 90000,90000and100000.and depreciation are $40000 each year .find out payback period for each assets

The payback period is ascertained by calculating the number of years needed to recover the cash invested in a project, For example, an investment of 1000 provides a return of 200,300,500 in consecutive three years. Then total of return in 3 years will be equal to the original investment. Hence the payback period is three years.

- the payback period is to dependent on cash inflows which are hard to predict. - The payback period only considers revenue, does not consider profits.

It's not a direct measure of a project's contribution to stockholder's wealth. You may reject project's that should be accepted when using the NPV analysis (best method used for determining whether or not a project is accepted in Capital Budgeting). Discounted Payback Period AdvantagesConsiders the time value of money Considers the riskiness of the project's cash flows (through the cost of capital) Disadvantages No concrete decision criteria that indicate whether the investment increases the firm's value Requires an estimate of the cost of capital in order to calculate the payback Ignores cash flows beyond the discounted payback periodYounes Aitouazdi: University of Houston Downtown

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Payback period method is the strategy used to calculate the amount of time that a given investment will take to recover the initial cost. The amount of time will help in deciding whether the project is viable or not. The shorter the period the more viable the project.

A discounted payback method is a formula that is used to calculate how long to recoup investments based on the discounted cash flows of the investment. It is a variation of payback period or the time it takes to recover a project investment given the discounted cash flow it has.

The basic criticisms of the payback period method are that it does not measure the profitability of an investment and it does not consider the time value of money.

we only know the disadvantages: The cash flows beyond the payback period are ignored..

Simple payback method do not care about the time-value of money principle while discounted payback period do take care of this principle in calculation.

Payback period method evaluates any investing activity from how much money it will pay back and how much time it requires to payback in number of years.

the payback method ... is a method to evaluate the project in capital budgeting ... or simply in a long term dicision making for the entity .and because it is a long term in nature ..... the risk is high ... by evaluatining methods ... we try to reduce the uncertinity ... one of the methods ...is payback method . the disadvantage of the payback method is ...it does not concern with the time value of money theory ....the second one is ...it ignore the incash flow and the outcash flow of the project , after the payback period .

Disadvantages of Payback Method: It may lead to excessive investment in short term projects. The choice of any cut-off payback period by an organization is arbitrary.

Method of evaluating investment opportunities and product development projects on the basis of the time taken to recoup the investment. This period is compared to the required payback period to determine the acceptability of the investment proposal. In contrast to return on investment and net present value methods, the cash inflows occurring after the payback period are not included in this method. Formula: Payback period (in years) = Initial capital investment ÷ Annual cash-flow from the investment.

In payback period of investment appraisal method all cash inflows and outflows are analysed and find out that in how many years investment proposal will earn the invested money.

payback period , it is to pay your period on time jajajaja

Formula for the Payback Period. Payback period = Initial investment / Annual Cash inflows