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Payback analysis - Paybackanalysis...

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Payback analysis Payback analysis comes in handy if a manager needs to decide whether to purchase a piece of  equipment. Say, for example, that a manager is purchasing cars for a rental car company. Although a  less-expensive car may take less time to pay off, some clients may want more luxurious models. To  decide which cars to purchase, a manager should consider some factors, such as the expected  useful life of the car, its warranty and repair record, its cost of insurance, and, of course, the rental  demand for the car. Based on the information gathered, a manager can then rank alternatives based  on the cost of each car. A higher-priced car may be more appropriate because of its longer life and  customer rental demand. The strategy, of course, is for the manager to choose the alternative that  has the quickest payback of the initial cost.
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