Risk Analysis Using - Payback Period -Sensitive Analysis
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The document discusses risk analysis using payback period and sensitivity analysis. It defines payback period as the time taken to recover the initial investment of a project. It notes payback period is used to compare projects and select those with the lowest number of years. It outlines advantages like simplicity and cost-effectiveness, and disadvantages like ignoring cash flows after payback. Sensitivity analysis determines how independent variables affect dependent variables under assumptions. There are two types: local and global sensitivity analysis. The document concludes payback period measures the relationship between cash inflows and investments, while sensitivity analysis gives insight into problem considerations.
Risk Analysis Using - Payback Period -Sensitive Analysis
- 1. PRESENTED BY: Hemalatha G S 1st M.Com Risk Analysis Using - Payback Period - Sensitive Analysis Under the guidance of Sundar B. N. Asst. Prof. & Course Co-ordinator GFGCW, PG Studies in Commerce Holenarasipura
- 3. Introduction The payback is time taken to recover an investment's initial investment . It is the number of year's to repay the initial investment made for a project . The payback period would be we the as a tool in capital budgeting to compare projects and calculate the period in year to get back the initial investment , the project is usasly chosen with the lowest number of years .
- 4. Meaning: The payback period is the amount of there that it take to recover your cost in a project
- 5. Definition's * The payback period is the amount of time that it take to recover your corts in a project
- 6. Advantage *it is very simple. It is easy to understand and apply * it is cort effective. * The payback period measures the direct relationship between annual cash inflows from proposal and the next investment required
- 7. Disadvantage *The payback period entirely ignores the cash inflows that occur after the payback period *The payback period also ignores salvage volue and total economic life of. Average net annual cash inflow Payback Period = cort of project (invest ) -------------------------------- ----
- 8. Sensitivity analysis Sensitivity analysis is the method wide to find out how independent variable volues will affect a particular dependent variable under a particular set of assumptions
- 9. Sensitive analysis type's Primarily there are two types of sensitivity analysis, which are. * Local sensitivity analysis * Global sensitivity analysis
- 10. Conclusion *The payback period is the time it take as investment to generate enough cash flow to payback the full amount of the investment * The payback period formula for even payments involves only two variables the initial investment amount and the net cash flow of the investment *Sensitivity analysis is a useful tool that assists decision_makers with more than just a solution to a problem. It gives a reasonable in sight into the problems consideration
- 11. Bibliography: * http://www.slideshare- Net/mobile/subhashrohits/payback_perio d -timevolue * https: //clear tax .in/g/terms/payback- period. * https://clear tax ; in /g/terms/sensitivity analysis
- 12. Thanks