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Capital Investment Appraisal Method:Payback Method

 

Further to my earlier article on Accounting Rate of Return, let’s look at another simple investment appraisal method called Payback Period.This method seeks to determine how long it takes for the investment project to pay back its initial capital cost.

 

 

Illustration:

Let’s say we have two project A & B, having the following initial capital cost, cash inflows and timing

 

Project A:

Year

Investment

Cash Savings/Inflows

Cumulative Inflows

0

100,000

 

 

1

 

30,000

30,000

2

 

40,000

70,000

3

 

30,000

100,000

4

This entry was posted on Monday, October 15th, 2007 at 5:32 am and is filed under b. Appraisal Methods. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “Capital Investment Appraisal Method:Payback Method”

  1. Snapshot Of Articles Covered Under Capital Investment/Long Term Decision | MBA Accounting Says:
    March 20th, 2008 at 6:39 am

    […] Capital Investment Appraisal Method-Payback Method  […]

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