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Hi sir, i would like to ask regarding this statement
Riskier projects should be evaluated with shorter payback periods
I could’nt understand regarding this statement, can you explain it to me? thank you.
The flows we use when appraising a project are always only estimates, and the further into the future we are forecasting then the more uncertain the estimates are going to be.
The shorter the payback period then the more certain we are going to be that the project will at least pay for itself.
I do actually explain this on pager 44 of our free lectures notes and in my lectures working through this chapter!! I do suggest that you watch the lectures – they are a complete free course and cover everything needed to be able to pass the exam well.
i’ve watched it sir but i got a little confused on this topic, but thank you for the clear explanation! have a good day 🙂
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