Advantages And Disadvantages Of Payback

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Answer no: - 2 (i) Definition of Payback: - Payback period is the time taken by the project to return the initial investment back to the investor. How long investor needs to wait to get his investment back. ADVANTAGES DISADVANTAGES 1. The payback technique is well known with business investigators for a few reasons. 1. The payback technique overlooks the time estimation of cash. 2. Payback is always calculated on the basis of cash inflows 2. The money inflows from a project might be sporadic, with the greater part of the arrival holding off on happening until well into what's to come. 3. The first is its straightforwardness. Most organizations will utilize a group of representatives with differed foundations to assess capital undertakings 3. A project could have an adequate rate of return yet at the same time not meet the organization's required minimum payback time frame. 4. Utilizing the payback technique and decreasing the assessment to a straightforward number of years is an effortlessly comprehended idea 4. The payback display does not consider cash inflows from a project that may happen after the initial investment has been recuperated. 5. Recognizing ventures that give the fastest rate of profitability is especially vital for organizations with restricted money that need to recoup their cash as fast as could be expected under the circumstances. 5. Most significant capital consumptions have a long-life expectancy and keep on providing wage long after the payback

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