What to pay attention to? The payback period is calculated using simple and discounted methods. Before starting the calculations, the discount rate, net cash flow and volume of planned investments are determined.
From this material you will learn:
In this article:
Approach to assessing the economic efficiency of a project
The concept and areas of application of project payback
Data required to calculate the project's payback
A simple method for calculating the payback period
Discounted method for costa rica phone data calculating project payback
Examples of calculating project payback
Calculation of the payback period of new equipment in the project
Additional calculations of project payback
Limitations of Using Payback Period Indicators
Errors in calculating the project payback period
Reducing the project payback period
Frequently asked questions about project payback
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Approach to assessing the economic efficiency of a project
The assessment of the economic efficiency of investments is indeed a key factor in making investment decisions. According to the information provided, this assessment is formed under the influence of the following interrelated factors:
an investment project must generate profit and create positive cash flows throughout the entire period of its implementation, which affects the payback period of the project;
the amount of initial investment and projected costs required to implement the investment plan;
the amount and proportions of own and attracted financial resources for the implementation of the project;
the cost of attracting own and borrowed financial resources;
time factor (taking into account the change in the value of cash flows in the future).
Approach to assessing the economic efficiency of a project
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When performing a forecast analysis of project payback factors, the following difficulties may arise:
capital investments can be one-time or distributed over a long period;
In addition to the main investment, working capital financing may be required to implement the project;
The duration of the investment cycle increases the degree of uncertainty in assessing all project parameters, which leads to an increase in investment risks.
In this regard, to assess the effectiveness of an investment project, a set of indicators is used that reflect the balance between the results achieved and the costs i