Answered: Why might the use of the cash payback…

Why might the use of the cash payback period for analyzing the financial performance of theatrical releases from a motion picture production studio is used over the net present value method?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 6DQ

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Question

Why might the use of the cash payback period for analyzing the financial performance of theatrical releases from a motion picture production studio is used over the net present value method?

Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.

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