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- 2011-7-11
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- 2014-2-27
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7#
发表于 2011-7-11 20:07
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I agree, its mainly liquidity because you dont consider the future Cash Flows once ur Initial Investment is paid back to you in payback calculations.
Smaller the payback lower is the risk of getting your initial invetment (not necessarily returns) back and vice versa, but i dont consider Payback gives back total measure of risk, since u enter into projects/Capital investments cause it gives you over and above Rq rate of return. (Payback doesnt consider this spread). It only tells u when u r going to breakeven. It may happen that you may not get any further cashflows after PB / Negative Cash Flows , and PB does not consider this, still this can be considered risky since you could have used that money for more productive use somewhere else (opp. Cost) and earned more return. But with payback period u will still accept such projects (which only are breakeven or have -ve cfs after payback)
Payback does not consider profits so its not a measue of profitability.
Pl. Correct me if i m wrong here. |
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