Why doesn't the payback rule always make shareholders better off ?
Why doesn't the payback rule always make shareholders better off ?
Payback
Re: Why doesn't the payback rule always make shareholders better off ?
The net present value rule and the rate of return rule both properly reflect the time value of money. But companies sometimes use rules of thumb to judge projects. One is ...
The net present value rule and the rate of return rule both properly reflect the time value of money. But companies sometimes use rules of thumb to judge projects. One is the payback rule, which states that a project is acceptable if you get your money back within a specified period. The payback rule takes noaccount of any cash flows that arrive after the payback period and fails to discount cash flows within the payback periodBrealey .
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