Please detailed statement two advantages and two disadvantages of using Payback Period to appraise and investment.

Question

Question

business accounting

Answer 1

Answer #1

Solution:

Advantage of payback period:

1. This is simple and easy to use to calculate payback period

2. The analysis is focused on how quickly money can be returned from an investment, which is essentially a measure of risk.

Disadvantage of payback period:

1. This method does not consider time value of money to evaluate investment.

2. Decision taken by using payback period, may not be in advantage for a business.

Answer 2

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