A company is considering a R250 000 investment with the following cash flows  Year 1 : R30 000 Year 2: R60 000 Year 3: R120 000 Year 4: R130 000 Year 5: R160 000 a) Determine the payback period of the investment ( present in table format)  b) If the company wants to recover its initial investment in year 3, is the investment worthwhile? c) Identify and explain any 3 advantages of using payback method.

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.