Shortening the Payback Period

It's an unfortunate but immutable fact of business life that, after you have gone through these careful calculations to derive payback periods based on both undiscounted and discounted cash flows, your executive director of finance says, “Smith, your analysis is close, but we have to keep the undiscounted payback to a maximum of five years. Go do it again.”

Here's how to meet that five-year requirement.

Case Study: Optimizing Costs

As you analyze the effects of costs on the payback period for offering a new wireless phone product, you see that there are several cost categories that you must take into account. Some costs, such as taxes, are beyond your company's control. Other costs, such as the initial capital investment ...

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