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2 years ago

What is the major limitation of using the payback period as a tool in capital budgeting?

2 answers:

7 0

The major limitation of using the payback period as a tool in capital budgeting is <u>it ignores the time value of money</u>.

Capital budgeting is a technique of estimating the ﬁnancial viability of capital investment over the existence of the funding. unlike some different forms of investment evaluation, capital budgeting makes a specialty of coins ﬂows rather than seasonedﬁts.

Capital budgeting is vital as it creates accountability and measurability. Any enterprise that seeks to make investments in its assets in a challenge without expertise in the dangers and returns worried would be held irresponsible by way of its owners or shareholders.

Capital Budgeting more often than not refers to the choice-making technique related to investment in long-time period tasks, an instance of which incorporates the capital budgeting system performed by way of an agency to determine whether or not to keep with the prevailing machinery or buy a brand new one in the vicinity of the vintage machinery.

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hoa [83]2 years ago

4 0

The major limitation of using the payback period as a tool in capital budgeting is that it ignores the time value of money.

The payback period technique does not account for the time fee of money idea and it's far directly thinking about the fee of cash inflows so it'll now not be presenting with the accurate estimation of while the capital is lower back to the shareholders and it's far the least correct approach due to the fact the opposite method like discounted payback period or internal rate of going back are imparting with a higher estimation due to the fact they cut price for the time value of money.

As payback does now not remember the time cost of money, it considers all cash inflows to be equal in fee irrespective of the time when it occurs. It could offer erroneous results, as the cash obtained a yr later than the given one (present) is much less in price, if we practice the idea of time cost of money.

The term payback period refers to the amount of time it takes to get better the cost of funding. In reality put, it's miles the duration of time and funding reaches a breakeven point. Human beings and businesses mainly make investments in their cash to get paid lower back, that's why the payback duration is so critical.

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Other things being equal, an increase in the number of sellers of a good will _____ for that good.

Ahat [919]

Answer:

The correct answer is letter "C": decrease equilibrium price and increase equilibrium quantity .

Explanation:

An increase in the number of sellers in a market of a certain good implies the quantity demanded for that good will increase, thus the equilibrium quantity will be higher. According to the demand law, if the quantity demanded goes up, the price is likely to decrease, so, the equilibrium price will be lower.

Thus, <em>the increase in sellers will raise the equilibrium quantity decreasing the equilibrium price.</em>

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3 years ago

Having a good credit history impacts every one of these o teams but one.Which is the one item not impacted by good credit histor

Archy [21]

The answer is C. Anywhere to rent/buy a car or any time of loan looks at your credit history. Employers are supposed to be unbiased and fair when considering candidates for job interviews and can not discriminate based on gender, race, sexual orientation, your credit, and a few other things.

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3 years ago

Natural monopolies form when:

ratelena [41]

Answer:one firm receives patent protection for certain basic produced process.

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3 years ago

In some countries a surgeon can earn 250000 or more each year. A nurse may earn just 40000 in comparison. Suggest three reasons

grandymaker [24]

Answer: See explanation

Explanation:

The reasons for the difference in wages include:

1. Education and training: A nurse uses about 4-5 years to train to become a nurse while a surgeon uses about 15 years both at medical school and for further training and examination before he or she qualifies as a surgeon. This is a reason for the higher earning of the surgeon.

2. Also, due to the low barriers to entry, there are numerous nurses than surgeons who are few. This affects earnings as well as there are more supply of nurses which brings about a lower income than surgeons who are scarce and highly priced.

3. The skills and experience matters as well and the risks involved in their jobs results in wage difference too.

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3 years ago

U.S. demand for Japanese products creates a ________ U.S. dollars and a ________ Japanese yen in the foreign exchange market.

crimeas [40]

Answer:

The correct answer is option C.

Explanation:

US demand for Japanese products will create a supply of US dollars and demand for Japanese yen in the foreign exchange market.

This is because when the US consumers purchase Japanese products they need to pay in Japanese yen, so they will exchange US dollars for Japanese yen. Consequently, this will lead to an increase in the supply of US dollars and a demand for Japanese yen.

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4 years ago