What serious drawbacks do the much-used payback method of investmentscreening have?

Q: what is the discounted payback period for the investment?

A: Payback Period is the calculation of periods or years within which cost of investment is recovered.…

Q: Explain several ways of defining the concept of rate of return on investment?

A: Return on investment is the tool that can be used to measure the performance of the companies.  The…

Q: How can we determine which projects are pure investments?

A: A pure investment project refers to an investment wherein the firm borrows money from the project…

Q: Are there sources of value in an investment? what they are? and give an example for both?

A: Yes, there are various sources of value in an investment. An investment is a stock or a bond. People…

Q: When do the firm expect to recover the initial investment?

A: The payback period alludes to what extent it takes for a speculator to hit breakeven to recoup the…

Q: What is a satisfactory investment? When the present value of benefits exceeds the cost of an…

A: Satisfactory investment refers to an investment  wherein the present value of benefits after…

Q: Why is it necessary to determine how long you can expect to reap benefit from the investment?

A: Individuals as well as firms often make investment and specify the time limit for which this…

Q: Discuss the difficulties in using Net Present Value [NPV] as an investment appraisal method.

A: The net present value method is used by the company for the evaluation of the profitability of…

Q: what would be the purchasing power of the total return on their investment

A: Purchasing Power: Purchasing power refers to the actual power of buying the goods of services with…

Q: Explain Simple versus Nonsimple Investments?

A: The question is based on the concept of different way of investments.

Q: Which one of the following is an example of conventional form of investment?

A: Conventional investment categories includes trading investment options.

Q: Which of the following methods does not consider the investment’s profitability? a. ARR b. Payback…

A:

Q: How can we reduce investment risks by asset diversification?

A: Answer: Diversification is nothing but the strategy that reduces the risk by allocating assets to…

Q: When considering multiple possible investments, why are rates of return preferable than monetary…

A: An investment's net profit or loss over a certain period expressed as a percentage of the…

Q: How can we find which projects are pure investments?

A: An investment is termed as asset or the item that is obtained with the aim of generating the income…

Q: What are the advantages/disadvantages of real estate as alternative investments?

A: Following are the advantages and disadvantages of real estate as alternative investments:…

Q: Give an example of a liquid investment and an illiquid investment. Discuss why you consider each of…

A: In finance, the term investment represents a financial technique to allocate surplus funds into an…

Q: Which of the following are two methods of analyzing capital investment proposals that both ignore…

A: Which of the following methods of evaluating capital investment proposals? Following four methods…

Q: Which of the following is a disadvantage of the internal rate of return criterion? Select one: a.…

A: Internal rate of return (IRR): At IRR, cash outflow will be equal to the present value of cash…

Q: What strategies are available to eliminate timing problems in investments? Explain Briefly

A: Introduction to Investments  Investment is referred to as the asset which is created with the…

Q: Payback period is one of the nondiscounting models used in capital investment decisions.  What are…

A: Payback period refers to the period in which the initial investment is recovered.

Q: How is it possible to achieve a higher rate of return without significantlyincreasing risk?

A: As we all learnes till now that higher the risk provides higher return and if we want the high…

Q: What do you mean by rate of return on the investment?

A: What do you mean by rate of return on the investment?

Q: Identify two disadvantages of using the payback period for comparing investments.

A:

Q: Why may the net-present-value and internal-rate-ofreturn methods yield different rankings for…

A:

Q: Explain the term Value investing strategies?

A: SOLUTION:-   Benjamin Graham, an American economist, investor, and professor, pioneered a new method…

Q: What is the value added by the design of the financing package? How does it alter both the return…

A: The question is based on the concept o the financial package, which is explained as a complete…

Q: Why have ETFs grown to become one of the most popular investment products? What are some of the…

A: Exchange traded funds are all such mutual funds which will be traded over the exchanges and they are…

Q: Which of the following methods does not consider the investment’s profitability? ARR Payback NPV…

A: Average rate of return (ARR) and Internal rate of return (IRR) are methods of computing rate of…

Q: What company is better in short term investment?

A: Answer:-  Investment meaning:- An asset or object purchased with the intention of generating income…

Q: Differentiate between Simple and Nonsimple Investments?

A: Simple investment: Simple investment is a type of investment in which the investment sign will…

Q: What type of projects does the Payback method favor?

A: Payback method: It implies to a method of evaluating investment projects by computing the time, it…

Q: Financially, what is the economic worth of outbidding thecompetitors for a project?

A: Companies often exploit opportunities in the market because they will create positive NPV for the…

Q: What is return on investment?

A: Return on investment  is a financial ratio which is measured as net income divided by the cost of…

Q: Is the investment risk concerned with the range of possible outcomes from aninvestment?

A: For a business, there are many types of risks associated with it. Some of the risks are credit risk,…

Q: What are the weaknesses of the payback method?  What other options do you have?

A: Pay back period is period required to recover initial amount of investment.

Q: What are the two types of risk according to the Capital Asset Pricing Model? Which of the two types…

A: The Capital Asset Pricing Model (CAPM) describes the link between systematic risk and expected…

Q: Explain Yields on Investment Annuities?

A: The question is based on the concept of calculation yield, which describes the  returns to the…