# The Difference Between The Present Value Of Cash I

**Topics:**Net present value, Rate of return, Internal rate of return

**Pages:**4 (809 words)

**Published:**April 21, 2015

Limitations

Basic payback period ignores the time value of money. This limitation can be overcome by applying the discounted payback period. Payback period does not take into account the level of cash flows of an investment after the payback period. In other words, payback period ignores the overall profitability of investments. Basic payback period can be difficult to calculate where multiple negative cash flows are incurred during the investment period. This problem can be solved by calculating the modified payback period as discussed above. Payback period does not provide a theoretically absolute decision rule like other appraisal methods (e.g. all investments with positive NPV should be accepted) and is therefore susceptible to subjective interpretation. Explanation

Payback Period is the duration needed to recover the cost of investment. All other things equal, the investment with a shorter payback period should be preferred. Long payback periods increase the riskiness of investments because the uncertainty increases with the length of time. 投资回收期允许投资者评估的原因是其投资生命的长度投资的风险。 容易计算和理解。

限制

基本投资回收期忽略了资金的时间价值。这种限制可以通过应用折现回收期来克服。 投资回收期不考虑回收期后的投资现金流的水平。换句话说，投资回收期忽略投资的整体盈利能力。 基本投资回收期可能很难计算，其中在投资期间都发生多负现金流。这个问题可以通过计算改性回收期如上所讨论的解决。 投资回收期不提供像其他评估方法的理论绝对的决策规则（如用净现值为正的投资都应该接受），因此容易受到主观的解释。 说明

投资回收期为收回投资成本所需的时间。

所有其他条件相同的情况，用更短的投资回收期，投资应该是首选。 长的投资回收期增加投资的风险性，因为不确定性的时间长度增加。

Making the investment decision

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