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10 Cards in this Set

  • Front
  • Back
Advantages of Payback
Easy to understand,
Works well with cash intensive business
Disadvantages of payback
Arbitrary standard,
Does not use TVM,
Does not consider cash flows past the payback day
Advantages of Discounted Payback
Easy to understand,
Works well with cash intensive business
Disadvantages of Discounted payback
Arbitrary standard,
Does not consider cash flows past the payback day
Advantages of AAR
Easy to understand
Information is readily available
Disadvantages of AAR
Does not use TVM,
Uses accounting information,
Almost always overstates the true return
Advantages of NPV
Uses all cash flows,
Uses TVM,
Has uniform decision rule
Disadvantages of IRR
Answer is in terms of %  Can’t put % into bankAnswer is in terms of %  Can’t put % into bank
Advantages of IRR
Uses TVM,
Considers all cash flows,
Absolute decision process
Advantages and disadvantages of PI
all same as PI