Discounted Payback Period Calculation | FIN-Ed
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Discounted Payback Period Calculation | FIN-Ed
This video is about discounted payback period. I am assuming that you already know how to calculate the payback period. If not, you may want to watch that video first. The link is also given in the description below. In this video, I will explain what discounted payback period is; how to calculate discounted payback period; and finally, how to make decisions based on your calculation. The discounted payback period is the length of time required for an investment’s cash flows, discounted at the investment’s cost of capital, to cover its cost. Although this method is similar to the payback period, it takes the time value of the money problem into consideration, which the payback period totally ignores. Thus, I think this method of finding a breakeven point is superior to the simple payback period technique.
Example:
Your division is considering two projects with the following cash flows (in millions). If the WACC is 10%, what are the discounted payback periods for both projects and which project will you accept?
Source: Fundamentals of Financial Management (Concise Edition) Brigham and Houston
Chapter 11: The Basics of Capital Budgeting
Problem: 11-6
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========================================
Thanks for watching...!!!
Discounted Payback Period Calculation | FIN-Ed
This video is about discounted payback period. I am assuming that you already know how to calculate the payback period. If not, you may want to watch that video first. The link is also given in the description below. In this video, I will explain what discounted payback period is; how to calculate discounted payback period; and finally, how to make decisions based on your calculation. The discounted payback period is the length of time required for an investment’s cash flows, discounted at the investment’s cost of capital, to cover its cost. Although this method is similar to the payback period, it takes the time value of the money problem into consideration, which the payback period totally ignores. Thus, I think this method of finding a breakeven point is superior to the simple payback period technique.
Example:
Your division is considering two projects with the following cash flows (in millions). If the WACC is 10%, what are the discounted payback periods for both projects and which project will you accept?
Source: Fundamentals of Financial Management (Concise Edition) Brigham and Houston
Chapter 11: The Basics of Capital Budgeting
Problem: 11-6
========Recommended Videos=============
Payback period: How to calculate payback period | FIN-Ed
Net Present Value (NPV): Net present value on ba ii plus | NPV...
Internal Rate of Return (IRR): Internal Rate of Return on ba ii plus...
Crossover Rate: Crossover rate calculation | Crossove...
Modified Internal Rate of Return (MIRR): Modified Internal Rate of Return | MI...
========================================
Thanks for watching...!!!
3 سال پیش
در تاریخ 1400/02/13 منتشر شده
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