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The payback is one of the simplest and most frequently used methods of capital investment appraisal. It is defined as the length of time that is required for a stream of cash proceeds from an investment to recover the original cash outlay required by the investment.
The payback period can only be a valid indicator of the time that an investment requires to pay for itself, if all cash flows are first discounted to their present values and the discounted values are then used to calculate the payback period. This adjustment gives rise to what is known as the adjusted or discounted payback period method
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I agree with the Answer added by: frank mwansa ACCOUNTING LECTURER 29 days ago