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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Payback method vs. Duration
Hi, please may I discuss about the difference between payback method and duration..
The payback method is the measure of the time required to earn back the amount invested in the project, and hence, evaluating the risk of such proposed project
Duration is the measure of the average time required for a project to deliver its value equivalent to the 100% if its present value of cash inflows.
Does this mean that, the payback method only takes into account the earning back of its investment amount, whilst duration not only considers the earning back of its investment amount, but also the cash inflows that are earned by including the NPV of the project?
Thank you.
That is correct 🙂
Oh I see. Thank you 🙂
You are welcome.