vnjones_wk6_d1.docx - According to our text there are three...

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According to our text, there are three primary methods, which are payback period, net present value method, and the internal rate of return method [ CITATION Bri20 \l 1033 ]. Varying on preferences and selection criteria, more emphasis is often placed on one approach over another. There are common advantages and disadvantage correlated with these commonly used valuation practices. The payback period calculates the length of time required to recoup the original investment. For example, if capital budgeting projects requires an initial cash expenditure of one million, this method estimates how many years are required for cash inflows to equate to the one million dollar outflow. A short period is preferred as it indicated that the project will "pay for itself" within a shorter time frame. Payback periods are typically used when liquidity presents a major concern. If a firm only has a limited amount of resources, they might be able to only carry out one

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