MANAGEMENT

Detailed explanation-1: -PBP may be calculated as the cost of safety investment divided by the annual benefit inflows. It is worth noting that PBP calculation uses cash flows, not the net income. PBP simply computes how fast a company will recover its cash investment.

Detailed explanation-2: -The methods of investment appraisal are payback, accounting rate of return and the discounted cash flow methods of net present value (NPV) and internal rate of return (IRR).

Detailed explanation-3: -The time value of money (TVM) is the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim. The time value of money is a core principle of finance. A sum of money in the hand has greater value than the same sum to be paid in the future.

Detailed explanation-4: -The simple payback period formula is calculated by dividing the cost of the project or investment by its annual cash inflows.