Te Au Rangahau (The Maori Business Research Centre at Massey University) Project
- Payback Period
Project A’s payback period falls in the seventh year while project B’s payback period falls in the sixth year. Project B would, therefore, be a better option using the payback period method. Note that for project A, the total payback is 20000 only, while for project B, the total payback is 22000.
The payback period decision method as the following assumptions, advantages and disadvantages. Ignores the time value of money. No discounting takes place. It also makes the assumption that inflows accrues evenly throughout the year. This could be contrary to the unfolding ...
