Friday, February 11, 2011

1207 #Part4

Tuesday- 8 Feb

Learned about Capital Budgeting.

Payback period- the length of time required to cover the initial investment.

Need to research more about:

  1. Financial Reporting System 139
  2. AFTA
  3. WTO

Disadvantages of Payback period-

  • doesn't take into account the effect of Time Value of Money
  • there is contigency
  • misleading calculation
Net Present Value
If positive, it has exceeded the initial investment.
If 0, it has covered only the initial investment and has high expectation (high interest rate).
If negative, it fails to cover the initial investment. 

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