Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-15T09:14:15.663Z Has data issue: false hasContentIssue false
  • English
  • Français

A Comment on Payback

Published online by Cambridge University Press:  19 October 2009

Morris Mendelson
Get access Rights & Permissions [Opens in a new window]

Extract

In a recent note in this journal, Professor Levy discussed the relative merits of the payback method and the discounted rate-of-return (IRR) method. In examining the relationship between K (IRR) and Kp (the reciprocal of the payback), he reaffirmed that the two were approximately equal based on the assumption that:

(1) annual earnings were the same every year, and

(2) ,

where N is the life of the asset.

Type
Communications
Information
Journal of Financial and Quantitative Analysis , Volume 6 , Issue 4 , September 1971 , pp. 1159 - 1160
Copyright
Copyright © School of Business Administration, University of Washington 1971

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 Levy, Haim, “A Note on the Payback Method,” Journal of Financial and Quantitative Analysis, 3 (December 1968).CrossRefGoogle Scholar

2 Gordon, Myron J., “The Payoff Period and the Rate of Profit,” Journal of Business, 28 (October 1955).Google Scholar

3 The tables used in the. present calculations were those in Bracken, Jerome and Christenson, Charles J., Tables for Use in Analysing Business Decisions (Homewood, Illinois: R. D. Irwin 1965). In the example above no attempt to interpolate was made.Google Scholar

4 See Goldsmith, Raymond, The National Wealth of the United States in the Post-War Period (Princeton: Princeton University Press 1962), p. 340.Google Scholar