UNIT 7 CHAPTER 32 - INVESTMENT APPRAISAL - Payback

Question 1

describe payback in terms of technique

Answer 1

simple

Question 2

what does payback measure

Answer 2

time period needed for the earnings of an investment to gain back its original costs

Question 3

what columns do you need for payback

Answer 3

outflow
inflow
net cash flow
cumulative net cash position

Question 4

simple payback formula

Answer 4

sum invested
_______________
net cash per time period

Question 5

complicated pay back period

Answer 5

number of full years +

amount of I not recovered
___________________________
revenue generated in the next year

Question 6

advantage 1 of payaback

Answer 6

quick and simple to calculate so anyone can understand

Question 7

payabck is quick and simple to calculate this exaplins popularit within

Answer 7

small bs

Question 8

Negative about ignoring - payback

Answer 8

ignores level of profits that may be genrated ultimatley by investment

for prof maximising bs this is an important factpr

Question 9

disadfvantage 2 of payback ignores…

Answer 9

timing of any receipts

Question 10

just cause you earn payback back quickly doesnt mean

Answer 10

best option for bs

Question 11

payback just refelcts

Answer 11

relative costs of investment/project rather than value brings to bs

Question 12

a business hoping to do well with their project and within the market may need to

soe

Answer 12

spend more on investment and therefore have a higher payback peiord