What is the advantages of payback period?

Advantages of Payback Method A longer payback period indicates capital is tied up. Focus on early payback can enhance liquidity. Investment risk can be assessed through payback method. Shorter term forecasts.

What are the advantages and disadvantages of discounted payback?

Disadvantages. Calculation of payback period using discounted payback period method fails to determine whether the investment made will increase the firm’s value or not. It does not consider the project that can last longer than the payback period. It ignores all the calculations beyond the discounted payback period.

What is an advantage of the average accounting return method of project analysis?

It can be compared to the return on assets ratio. Which one of the following is an advantage of the average accounting return method of analysis? -Easy availability of information needed for the computation. -Inclusion of time value of money considerations.

What is an advantage of the average accounting return method of analysis?

Transcribed image text: The advantages of using average accounting return include its Multiple Choice use of easily obtained information inclusion of time value of money considerations o use of a cutoff rate as a benchmark o use of pretax income in its computation o o use of real, versus nominal, average income The are …

What is the disadvantage of using the payback period as compared to the net present value?

Payback method, vs NPV method, has limitations for its use because it does not properly account for the time value of money, inflation, risk, financing or other important considerations. Payback vs NPV ignores any benefits that occur after the payback period. It also does not measure total incomes.

What are advantages and disadvantages of NPV?

Advantages and disadvantages of NPV

NPV Advantages	NPV Disadvantages
Incorporates time value of money.	Accuracy depends on quality of inputs.
Simple way to determine if a project delivers value.	Not useful for comparing projects of different sizes, as the largest projects typically generate highest returns.