Steve B:  Payback period is the time it takes for the total revenue from an Investment to add up to the original cost .. (after taking into account things such as Cost Of Capital and Rate of Inflation) ... Take, for example, an investment of ?1000 that yields ?10 a month. Plainly you will have to wait 100 months to get ?1000. So the crude Payback period is 100 months .. NPV is the value today of money you will receive in the future. It is 'discounted' by some rate (at least by the rate of inflation). Again, a crude example. Say RPI is 10%. This means that money in a year will be worth 10% less than receiving it today. Thus, ?110 in a year has an NPV of ?100. For Accounting rate of return see link ..
2008-08-18 03:26:49