As discussed before, there are majorly two evaluation criteria for evaluating an investment decision. This blog post will be discussing the second evaluation criteria: Non-Discounted Cash Flow. A non-discount method of capital budgeting is one that does not consider the time value of money. In other words, all currency earned in the future are assumed to have the same value as today's currency. One example of a non-discount method is the payback method, since it does not consider the time value of money. The payback method simply computes the number of years it will take for an investment to return cash that is equal to the amount invested. The computed number of years is referred to as the payback period. To illustrate, let us assume that a company invests ₹1, 00,000 today in a project that is expected to generate cash of ₹ 50,000 for two years followed by ₹ 10,000 per year for four additional years. Its payback period is two years ( ₹ 50,000 + ₹ 50,000). ...
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