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Author Topic: payback and internal rate of return for investment  (Read 2623 times)

ikyfarhan

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payback and internal rate of return for investment
« on: November 16, 2008, 03:46 AM »
hi all,

i have a project  and i was asked to write a report about  the following  question:

the prosposal calls from a sale manage  for  a significant intial investment(in fixed assets), but has 3 yearpayback and 25 % internal rate of return

can anyone tell me how viable  is this proposal

anything regarding about payback and internal return  will be greatly appreciated.

thanks
 

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Offline anurag08

Re: payback and internal rate of return for investment
« Reply #1 on: November 16, 2008, 07:43 AM »
well payback is not a gud method to value cash inflows from any investment ....

if the payback is 3 yrs ... then it means that ur initial cost will be recovered in three years from the cash inflows generated thru that assets ...

IRR - Internal rate of return is a better method ....

the more better still is NPV method .... Net Present Value ... Include that ....

And for viability of the project u need to know the intial outflow (ie Cost of assets) and the inflows it generates ...
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