The payback period shows how long it takes for a project to…
The payback period shows how long it takes for a project to earn back the money that was put into it. To find this, we add up the expected cash flows for each year until the total amount equals zero (break-even) or goes up (profit).
Read DetailsConsidering how much money changes hands over time, the disc…
Considering how much money changes hands over time, the discounted payback period shows how long it will take to get the initial investment back. The present value (discounted value) of future cash flows is used to figure this out, not just the raw numbers. Inflation or deflation means that a dollar today is worth more than a dollar tomorrow. This number tells you how quickly you will get your money back.
Read DetailsConstant dollars are different from today’s dollars because…
Constant dollars are different from today’s dollars because they take into account whether prices will rise or fall in the future. It is easier to see how much money will be worth in year n if you do this. That is, it shows how much that money was worth in year n.
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