Payback Period: The payback period refers the time period in which the investment will reach at the break even of an investment. It shows the minimum time requirement for an investment to cover its invested cost. Net Present Value : Net present value refers the variance between a present value of cash flows and the present value of cash outflows. Internal Rate of Return : Internal rate of return is that rate at which the present value of cash inflows is similar to present value of cash outflows and resulted net present value became zero. To identify: The investment should be made or not if the payback period and net present value are as the requirement.

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Chapter 8, Problem 25P

Summary Introduction

Payback Period: The payback period refers the time period in which the investment will reach at the break even of an investment. It shows the minimum time requirement for an investment to cover its invested cost.

Net Present Value: Net present value refers the variance between a present value of cash flows and the present value of cash outflows.

Internal Rate of Return: Internal rate of return is that rate at which the present value of cash inflows is similar to present value of cash outflows and resulted net present value became zero.

To identify:

The investment should be made or not if the payback period and net present value are as the requirement.

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