simple payback

Question 1

simple payback

Answer 1

the time it takes for a project to repay its initial investment

Question 2

what is it used for

Answer 2

to analyse whether an investment project is worthwhile

Question 3

calculation

Answer 3

amount required/net cash flow in a year

Question 4

advantages

Answer 4

simple to use
adapts to technological change easily
works well for companies with poor cash flow
quick process so good for dynamic markets

Question 5

disadvantages

Answer 5

can be inaccurate, just predictions
ignores qualitative aspects of project
can encourage short term thinking
doesn’t consider time value of money