The payback period method of investment appraisal is explained in this video.

#alevelbusiness #aqabusiness #edexcelbusiness

VIDEO CHAPTERS
0:00 Introduction
0:11 What is Investment Appraisal?
1:09 The Results of Each Method
2:11 How to Calculate Payback
2:59 A Simple Example of Payback
3:33 The Chocolate Moulding Machine: Investment Numbers
5:30 Calculating the Precise Payback Period
6:18 Benefits of Using Payback Period
7:22 Drawbacks of Using Payback Period

VIDEO SUMMARY

The video is about investment appraisal and a specific method called payback period.

The payback period is a method used in investment appraisal to assess the time it takes to recover the initial investment. It is calculated by keeping a running total of the net cash flows for each period. The payback period is achieved when the cumulative cash flow turns positive.

The video lists advantages and disadvantages of using payback period.

Here are some of the advantages:

Easy to calculate
Focuses on cash flows
Focuses on the speed of return

Here are some of the disadvantages:

Ignores what happens after payback has been achieved
Encourages focusing on projects with quickest payback period rather than highest overall return
Does not take into account the time value of money

Overall, payback period is a simple method to assess the attractiveness of an investment. However, it is important to be aware of its limitations before making a decision based solely on the payback period.