3 years certified financial controller cfc 20 payback

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Unformatted text preview: –c)/d = 3 + (40 – 37) / 10 = 3 + (3) / 10 = 3.3 Years Certified Financial Controller CFC 20 Payback Solution (#2) (#2 0 1 2 –40 K –40 K 10 K –30 K 12 K –18 K PBP Cumulative Cash Flows 41 3 15 K –3 K 4 5 10 K 7K 7K 14 K = 3 + ( 3K ) / 10K 10 = 3.3 Years Note: Take absolute value of last negative cumulative cash flow value. Certified Financial Controller CFC PBP Acceptance Criterion The management of Basket Wonders management of Basket Wonders has set a maximum PBP of 3.5 years for projects of this type. Should this project be accepted? Yes! The firm will receive back the initial cash outlay in less than 3.5 years. [3.3 Years < 3.5 Year Max.] 42 Certified Financial Controller CFC 21 PBP Strengths and Weaknesses Strengths: Weaknesses: • Easy to use and • Does not account understand for TVM • Can be used as a measure of measure of liquidity • Does not consider cash flows beyond cash flows beyond the PBP • Easier to forecast • Cutoff period is ST than LT flows subjective 43 Certified Financial Controller CFC Internal Rate of Return (IRR) IRR is the discount rate that equates the the discount rate that equates the present value of the future net cash flows from an inv...
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This note was uploaded on 05/28/2013 for the course FINANCE economy taught by Professor Nill during the Fall '12 term at Bronx School Of Law And Finance.

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