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Payback method vs. Duration

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Payback method vs. Duration

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 15, 2022 at 10:39 am #655683
    Ron123
    Participant
    • Topics: 72
    • Replies: 93
    • ☆☆

    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.

    May 15, 2022 at 3:41 pm #655701
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54711
    • ☆☆☆☆☆

    That is correct 🙂

    May 16, 2022 at 1:36 pm #655804
    Ron123
    Participant
    • Topics: 72
    • Replies: 93
    • ☆☆

    Oh I see. Thank you 🙂

    May 16, 2022 at 3:10 pm #655811
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54711
    • ☆☆☆☆☆

    You are welcome.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Payback method vs. Duration’ is closed to new replies.

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