Advantages of the Payback Method
The payback period in capital budgeting refers to the period required for the return on an investment to "repay" the sum of the original investment. Payback period, as a tool of analysis, is often used because it is easy to apply and understand for most individuals, regardless of academic training or field of endeavor. When used carefully or when comparing similar investments, it can be quite useful. All else being equal, shorter payback periods are preferable to longer payback periods. As a ...
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