Post by account_disabled on Dec 27, 2023 23:27:42 GMT -5
The limitations of simple payback, there is discounted payback. This uses a discount rate, usually annual. Rate defined by the investors themselves. In this way, all cash flows will have the discount of that rate in relation to the specified period. In case you want to update the values and bring to the NPV Liquid Present Value a flow that is future periods, the formula can be used. VPL FC TMA, where FC is the cash flow and corresponds, in this example, to , while the TMA is . Remember that is NPV. That means that the present value of the cash flow is not , but approximately Considering the example given above, in the topic “How to calculate your payback?” , another value is obtained for the discounted payback.
Initial investment , Average cash flow result months , Simple payback Special Data months or approximately months TMA per year VPL , , Discounted payback , , months or approximately months . That is, using a discount rate, updating nominal values, the time for return increases a little. Conclusion Payback, like other indicators, has its importance and must be considered by managers when evaluating the viability of projects and investments. Although every business is subject to risks and losses, payback provides guidance to determine the degree of risk of certain business ideas, leaving the manager with the final decision to carry them out or not.
Considering the economic crisis and the business conditions themselves, the most prudent thing is to avoid investments that are very risky or at least, leave them for another time. Invest and plan safely, especially if your company does not have much capital. Reserve the money for the immediate needs of the business and avoid going into debt to make very risky and illiquid investments. In short, be prudent and use the payback as an ally when making decisions and choosing investments. The place and how you will apply your capital will make all the difference to the success or detriment of your company. Lately and very frequently, we hear our friends talk about a video, meme or photo that went viral on social media.
Initial investment , Average cash flow result months , Simple payback Special Data months or approximately months TMA per year VPL , , Discounted payback , , months or approximately months . That is, using a discount rate, updating nominal values, the time for return increases a little. Conclusion Payback, like other indicators, has its importance and must be considered by managers when evaluating the viability of projects and investments. Although every business is subject to risks and losses, payback provides guidance to determine the degree of risk of certain business ideas, leaving the manager with the final decision to carry them out or not.
Considering the economic crisis and the business conditions themselves, the most prudent thing is to avoid investments that are very risky or at least, leave them for another time. Invest and plan safely, especially if your company does not have much capital. Reserve the money for the immediate needs of the business and avoid going into debt to make very risky and illiquid investments. In short, be prudent and use the payback as an ally when making decisions and choosing investments. The place and how you will apply your capital will make all the difference to the success or detriment of your company. Lately and very frequently, we hear our friends talk about a video, meme or photo that went viral on social media.