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The payback is the time required to recover the initial investment cost. Expressed in years, evaluating investment opportunities and associated risks is a quick and straightforward method. A shorter payback period generally makes the investment more attractive. In practice, people often refer to the payback as the time it takes to "get our bait back" or recover the initial funds put into the project.

For example, suppose Sarah opens a restaurant with an initial investment of $50,000 and earns $5000 annually. In that case, the payback period is calculated by dividing $50,000 by $5,000, resulting in a payback period of 10 years. Similarly, businesses use the payback period to evaluate investments like purchasing equipment or launching new projects, especially when seeking a fast investment return.

However, the payback period has limitations, as it doesn't factor in the time value of money, potential earnings after the payback period, or the project's overall profitability.

Du chapitre 7:

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7.6 : Payback

Capital Budgeting

79 Vues

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7.1 : Introduction to Capital Budgeting

Capital Budgeting

190 Vues

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7.2 : Basics of Investment Decision-making

Capital Budgeting

118 Vues

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7.3 : Importance of Capital Budgeting

Capital Budgeting

88 Vues

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7.4 : Advantages and Limitations of Capital Budgeting

Capital Budgeting

270 Vues

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7.5 : Capital Budgeting Techniques

Capital Budgeting

131 Vues

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7.7 : Payback Period

Capital Budgeting

45 Vues

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7.8 : Discounted Payback Period

Capital Budgeting

63 Vues

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7.9 : Net Present Value

Capital Budgeting

244 Vues

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7.10 : Net Present Value Method

Capital Budgeting

129 Vues

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7.11 : Decision-making Through Net Present Value

Capital Budgeting

50 Vues

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7.12 : Internal Rate of Return

Capital Budgeting

139 Vues

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7.13 : Calculating Internal Rate of Return

Capital Budgeting

32 Vues

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7.14 : Decision-making Through Internal Rate of Return

Capital Budgeting

38 Vues

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7.15 : Average Rate of Return

Capital Budgeting

36 Vues

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