00:01
Okay, so we're going to be looking at the payback period.
00:07
Whenever an investment is done, there are so many ways of looking at the feasibility or the benefits of that particular investment, a method known as capital appraisal.
00:24
But the payback period is basically one of those methods.
00:28
And what it entails is simply an attempt to measure how long it's going to take, how long is going to take to pay off the investment amount in terms of the number of years.
00:44
Okay, so basically when we look at the information provided, we're given that the investment in the asset, or we can say the asset cost is actually $200 ,000.
00:59
Thousand dollars and we have the annual net cash flows, annual net cash flows, there's 50 ,000 dollars.
01:13
And the life of this, or the, which is called the useful life, is 10 years.
01:19
The salvage value is actually zero and the discount rate is actually given.
01:32
Is 10%.
01:36
Now with this particular information we are required to calculate the pay pay back period.
01:42
So one thing that you quickly and notice is that the payback period is simply that it's not a discounted payback period, it's just the payback period...