Total Marks5Starting DateWednesday, December 02, 2015Closing DateFriday, December 04, 2015StatusOpenQuestion TitleCapital Budgeting TechniquesQuestion Description

Learning Objective

How to apply capital budgeting techniques to make decisions on capital investment?

 

Learning Outcome

Students would be able to apply payback technique of capital budgeting in a situation where it is highly required.

 

Question

It is not conceptually preferable to use payback period as a tool to decide about the capital investments but still it is used by the mangers; why it is preferred to select a project when a better tool like NPV is available? And why it should not be considered?

 

Instructions

§        Answer must be given in bulleted form only.

§        Answer must NOT exceed 100 words.

§        Do not copy or exchange your answer with other students. Two identical/copied comments will be marked Zero (0) and may damage your grade in the course.

§        Obnoxious or ignoble answer should be strictly avoided.

§        Questions/queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over

Views: 194

Replies to This Discussion

It relates to Lecture 08.
In Pay Back Period technique, we try to find the time period in which the amount we invested can be recovered. It is easy and simple method but does not takes into account time value of money and interest rates. In NPV, calculations involve too many estimates and it is a complex method. We have to forecast future cash flows and sales in this method also. Forecasting is not easy, it involves many factors like interest rate, discounting, future economic opportunities. So Pay back period is preferred as it is simple and easy.

today is the last date

RSS

SPONSORED LINKS

SPONSORED LINKS

© 2019   Created by Irfan Khan MSCS.   Powered by

Badges  |  Report an Issue  |  Terms of Service