Pay-Back Period .( True or False )?

Dear , 

 

if you mean Payback Period , it is absolutely true . we can forecast the cash flow by estimating the time required to recoup the funds expended in our projects, or to reach the break-even point. 

 

If helpful ! , vote up .

 

Best Regards .

SHAMEEM 

 

False, pay-back period method fails to take into account the time value of money and does not take into consideration additional cash flow beyond the payback period. Applying single cut off date to every project may result in accepting many marginal project and rejecting good ones.

False, it ignores time value of future cash flows. 

Payback period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point. [1] For example, a $1000 investment made at the start of year 1 which returned $500 at the end of year 1 and year 2 respectively would have a two-year payback period. Payback period is usually expressed in years. Starting from investment year by calculating Net Cash Flow for each year: Net Cash Flow Year 1 = Cash Inflow Year 1 - Cash Outflow Year 1. Then Cumulative Cash Flow = (Net Cash Flow Year 1 + Net Cash Flow Year 2 + Net Cash Flow Year 3, etc.) Accumulate by year until Cumulative Cash Flow is a positive number: that year is the payback year.

The time value of money is not taken into account. Payback period intuitively measures how long something takes to "pay for itself." All else being equal, shorter payback periods are preferable to longer payback periods. Payback period is popular due to its ease of use despite the recognized limitations

thanks for invitation 

i think answer is : false 

we can not say that there is best way to evaluate Projects 

there are alot you can work on to expect projects income ,  cashflow etc 

 

 

False. The method does not consider a) expected outflows during pay-back period and b) expected inflows / outflows after pay-back period.

Agreed to Muhammad Shameem.

False. It is the simpliest method but not the accurate because it is not taking into account the time value of money.

False. this method provides the time period in which a venture will achieve break even 

Payback period is the oldest method of investment /project appraisal. Now modern techniques are there to evaluate the investment/projects and rates of return. Payback ignores the rate of return and it also does not take into account the cash flows once payback is achieved.

false,there is many method it depend on the project and the aim of investor