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“Another advantage adjusted payback has over traditional payback is that it has a clear accept or reject criterion.Using payback ,acceptance of a project depends on an arbitrarily determined cut-off time .Using DPP a project is acceptable if it pays back within it,s lifetime”
Well what i don,t understand here is that in a traditional payback the real cash inflows define a decision so how come a traditional payback is arbitrarily ?And a traditional payback also payback in it,s lifetime?I don’t know where you read the statement, but if you have copied it correctly then it is not correct.
The traditional payback period and the discounted payback period both require an arbitrary cut-off time when making the decision.
(Whoever wrote it is thinking of the NPV criterion, where a project is acceptable if the NPV is positive – i.e. that it pays back over its lifetime.)
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