FIN-515- Managerial Finance Week 5_Capital Budgeting_Discussion_Question_1_Answer

Apr 24th, 2015
Studypool Tutor
Price: $5 USD

Tutor description

FIN-515- Managerial Finance Week 5_Capital Budgeting_Discussion_Question_1_Answer

Word Count: 3210
Showing Page: 1/7
Capital Budgeting (graded) Discuss and illustrate a capital budgeting opportunity for a firm in your industry. let's first focus on the payback period vs. Net Present Value (NPV). What are the flaws of the payback period in comparison to NPV? NPV (Net Present Value) is calculated in terms of currency while Payback method refers to the period of time required for the return on an investment to repay the total initial investment. NPV, payback, and many other measurements form a number of solutions to evaluate project value.Payback method, vs npv method, has limitations for its use because it does not properly account for the time value of money, inflation, risk, financing or other important considerations. While NPV method considers time value and it gives a direct measure of the dollar benefit on a present value basis of the project to the firm's shareholders. NPV is the best single measure of profitability.Payback, vs npv, ignores any benefits that occur after the payback period. It also does not measure total incomes. An implicit assumption in the use of payback period is that returns to the investment continue after payback period. Payback method does not specify any required comparison to other investments or investment decision making. It indicates the maximum acceptable period for the investment. While NPV measures the total dollar value of project benefits. NPV, payback period fully considered, is the better way to compare with different investment projects.http:/

Review from student

Studypool Student
" <3 it, thanks for saving me time. "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1831 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors