The three potential flaws with regular payback method and whether the discounted payback method corrects all three flaws. Introduction: Payback Period: It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it. Discounted Payback Period: It refers to the time that a project takes to repay the amount invested with some return attached to it after considering the time value of money or discounted cash flows.

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Chapter 11, Problem 2Q

Summary Introduction

To explain: The three potential flaws with regular payback method and whether the discounted payback method corrects all three flaws.

Introduction:

Payback Period:

It refers to the time period that is required to get an amount invested in a project with some return on it. In other words, it is the time that a project takes to repay the amount invested with some return attached to it.

Discounted Payback Period:

It refers to the time that a project takes to repay the amount invested with some return attached to it after considering the time value of money or discounted cash flows.

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