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3.8 INVESTMENT APPRAISAL (Infos (Uncertainties due to external factors…

- - - - long payback period will increase interest payments **
      - more capitals are available for other projects when the payments is settled fast
      - reduce the probability of the project to become unprofitable after 10 years
      - reduce risk of uncertainties
      - higher value of money due to prevention of inflation
    - - quick and easy to calculate
      - results are easily understood by managers
      - concentrate on more accurate short-term projects
      - eliminate unfit projects
    - - doe not measure overall profitability of project
      - concentration = lose opportunities on profitable investments
      - does not consider the timing of cash flows during payback period
  - - - uses all of the cash flows
      - focuses on profitability
      - easily understood and compared to other projects
      - result can be quickly assessed
    - - ignores timing of the cash flows
      - inaccurate later cash flows would be included
      - the time value of money is ignored