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Limit of Payback Period Applicability at Creation of Guaranteed Redemption Prices
[Meze využití doby návratnosti při formování garantovaných výkupních cen]

Author

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  • Josef Valach

Abstract

Payback period is not suitability criterion for evaluation great part of investment projects and also for creation guaranteed redemption price of energy. It ignores time factor and also cash flows after the cut-off date. For projects with greater internal rates of return and with longer economic lives it can be proved that evaluation by payback period and by internal rate of return is significantly approximate. Interest payments from long debt capital should not be included in project cash flow. It can be used precisely valuation by adjusted net present value or by adjusted weighted average cost of capital.

Suggested Citation

  • Josef Valach, 2013. "Limit of Payback Period Applicability at Creation of Guaranteed Redemption Prices [Meze využití doby návratnosti při formování garantovaných výkupních cen]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2013(2), pages 84-95.
    • Handle: RePEc:prg:jnlcfu:v:2013:y:2013:i:2:id:342:p:84-95
    DOI: 10.18267/j.cfuc.342
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    References listed on IDEAS

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    1. Miles, James A. & Ezzell, John R., 1980. "The Weighted Average Cost of Capital, Perfect Capital Markets, and Project Life: A Clarification," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(3), pages 719-730, September.
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    More about this item

    Keywords

    Payback Period; Internal Rate of Return; Interest from long debt capital; Financial Structure; Adjusted weighted average cost of capital; Doba návratnosti; Vnitřní výnosové procento; Úrok z dlouhodobého cizího kapitálu; Finanční struktura; Upravené průměrné náklady kapitálu;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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