{"showCoverPage":true,"bookCover":{"coverDescription":"

Illustrative Data<\/h3>\n\n
To help understand quantitative techniques, the below example will help to illustrate cash flows.  <\/p>\n\n
Click through the pages to review the elements of this topic.<\/p>\n","coverMedium":{"params":{"decorative":true,"contentName":"Image","expandImage":"Expand Image","minimizeImage":"Minimize Image","title":"Photo by Maxim Berg on Unsplash","file":{"path":"images\/file-6633aa8d9ab62.jpg","mime":"image\/jpeg","copyright":{"license":"U"},"width":3800,"height":2250}},"library":"H5P.Image 1.1","metadata":{"contentType":"Image","license":"U","title":"Untitled Image"},"subContentId":"c1485503-74d7-4d5d-909a-6a70bb35a2b5"}},"chapters":[{"params":{"content":[{"content":{"params":{"text":"
To help understand quantitative techniques, the below example will help to illustrate cash flows.  <\/p>\n\n
Stark Industries is looking at acquiring a new piece of equipment at $500,000. The new equipment will last 12 years and will have zero salvage value at the end of its life. Annual cash inflows are $300,000 and outflows are $250,000. <\/p>\n\n
<\/p>\n\n
Initial Investment                                                      $500,000 <\/strong><\/p>\n\n
Estimated useful life                                                 12 years <\/strong><\/p>\n\n
Estimated Salvage value                                          $0 <\/strong><\/p>\n\n
Estimated Annual Cash Flows <\/strong><\/p>\n\n
Cash inflows from customers            $300,000 <\/strong><\/p>\n\n
                        Cash outflows for operating costs    $250,000 <\/strong><\/p>\n\n
                        Net Annual Cash Flow                     $50,000 <\/strong><\/p>\n\n

Cash Payback Technique <\/h3>\n\n
The cash payback technique is useful in identifying the time period required to recover the cost of the initial cash investment from the net annual cash flow resulting from this initial investment.  <\/p>\n\n
Cost of Capital Investment =    Cash Payback Period <\/strong><\/p>\n\n
Net Annual Cash Flow   <\/strong><\/p>\n\n
500,000 \/ 50,000 = 10 years <\/strong><\/p>\n\n
This evaluation of the payback period is often associated with the expected useful life of the capital investment. As this payback period is not far off from the useful life, it may not be as attractive to Stark Industries. For most companies, using this payback technique to decide between different alternative projects will identify that the shorter the payback period - the more attractive the investment for two reasons: <\/p>\n\n
\n\t
The earlier the company\u2019s investment is sufficiently covered, the sooner its funds are free to investment into another project or use for other purposes <\/li>\n\t
The risk is lower in a shorter payback period due to less likelihood of corporate changes or economic shifts.  <\/li>\n<\/ol>\n"},"library":"H5P.AdvancedText 1.1","metadata":{"contentType":"Text","license":"U","title":"Untitled Text"},"subContentId":"d701ca75-d371-4d32-b225-a0303df697b3"},"useSeparator":"auto"}]},"library":"H5P.Column 1.18","metadata":{"contentType":"Column","license":"U","title":"Illustrative Data"},"subContentId":"fa141583-6430-45e1-814c-095b51ffd003"},{"params":{"content":[{"content":{"params":{"introPage":{"showIntroPage":false,"startButtonText":"Start Quiz","introduction":""},"progressType":"dots","passPercentage":50,"questions":[{"params":{"media":{"disableImageZooming":false},"taskDescription":"Drag the words into the correct boxes","overallFeedback":[{"from":0,"to":100}],"checkAnswer":"Check","submitAnswer":"Submit","tryAgain":"Retry","showSolution":"Show solution","dropZoneIndex":"Drop Zone @index.","empty":"Drop Zone @index is empty.","contains":"Drop Zone @index contains draggable @draggable.","ariaDraggableIndex":"@index of @count draggables.","tipLabel":"Show tip","correctText":"Correct!","incorrectText":"Incorrect!","resetDropTitle":"Reset drop","resetDropDescription":"Are you sure you want to reset this drop zone?","grabbed":"Draggable is grabbed.","cancelledDragging":"Cancelled dragging.","correctAnswer":"Correct answer:","feedbackHeader":"Feedback","behaviour":{"enableRetry":true,"enableSolutionsButton":true,"enableCheckButton":true,"instantFeedback":false},"scoreBarLabel":"You got :num out of :total points","a11yCheck":"Check the answers. The responses will be marked as correct, incorrect, or unanswered.","a11yShowSolution":"Show the solution. The task will be marked with its correct solution.","a11yRetry":"Retry the task. Reset all responses and start the task over again.","textField":"For most companies, using this payback technique to decide between different alternative projects will identify that the shorter the payback period - the more attractive the investment for two reasons: \n\nThe earlier the company\u2019s investment is sufficiently covered, the sooner its funds are free to investment into another project or use for other purposes \n\nThe risk is lower in a shorter payback period due to less likelihood of corporate changes or economic shifts."},"library":"H5P.DragText 1.10","metadata":{"contentType":"Drag the Words","license":"U","title":"Untitled Drag the Words"},"subContentId":"1285c77e-652f-47fb-8c3e-bb9179fd42c4"},{"params":{"media":{"disableImageZooming":false},"correct":"true","behaviour":{"enableRetry":true,"enableSolutionsButton":true,"enableCheckButton":true,"confirmCheckDialog":false,"confirmRetryDialog":false,"autoCheck":false},"l10n":{"trueText":"True","falseText":"False","score":"You got @score of @total points","checkAnswer":"Check","submitAnswer":"Submit","showSolutionButton":"Show solution","tryAgain":"Retry","wrongAnswerMessage":"Wrong answer","correctAnswerMessage":"Correct answer","scoreBarLabel":"You got :num out of :total points","a11yCheck":"Check the answers. The responses will be marked as correct, incorrect, or unanswered.","a11yShowSolution":"Show the solution. The task will be marked with its correct solution.","a11yRetry":"Retry the task. Reset all responses and start the task over again."},"confirmCheck":{"header":"Finish ?","body":"Are you sure you wish to finish ?","cancelLabel":"Cancel","confirmLabel":"Finish"},"confirmRetry":{"header":"Retry ?","body":"Are you sure you wish to retry ?","cancelLabel":"Cancel","confirmLabel":"Confirm"},"question":"
Using cash flow numbers as inputs in making a capital budget decision, one of the key elements structuring the decision making process includes:<\/p>\n\n
Connectivity of proposed projects - how independent or connected are these proposed projects to one another.<\/p>\n"},"library":"H5P.TrueFalse 1.8","metadata":{"contentType":"True\/False Question","license":"U","title":"True\/False Question"},"subContentId":"9e47745d-806d-410b-ace0-e0af50cc257e"},{"params":{"media":{"disableImageZooming":false},"correct":"true","behaviour":{"enableRetry":true,"enableSolutionsButton":true,"enableCheckButton":true,"confirmCheckDialog":false,"confirmRetryDialog":false,"autoCheck":false},"l10n":{"trueText":"True","falseText":"False","score":"You got @score of @total points","checkAnswer":"Check","submitAnswer":"Submit","showSolutionButton":"Show solution","tryAgain":"Retry","wrongAnswerMessage":"Wrong answer","correctAnswerMessage":"Correct answer","scoreBarLabel":"You got :num out of :total points","a11yCheck":"Check the answers. The responses will be marked as correct, incorrect, or unanswered.","a11yShowSolution":"Show the solution. The task will be marked with its correct solution.","a11yRetry":"Retry the task. Reset all responses and start the task over again."},"confirmCheck":{"header":"Finish ?","body":"Are you sure you wish to finish ?","cancelLabel":"Cancel","confirmLabel":"Finish"},"confirmRetry":{"header":"Retry ?","body":"Are you sure you wish to retry ?","cancelLabel":"Cancel","confirmLabel":"Confirm"},"question":"
Using cash flow numbers as inputs in making a capital budget decision, one of the key elements structuring the decision making process includes:<\/p>\n\n
A company\u2019s decision-making approach - how does a company determine or rank projects based on desirability? <\/p>\n"},"library":"H5P.TrueFalse 1.8","metadata":{"contentType":"True\/False Question","license":"U","title":"True\/False Question"},"subContentId":"1611e8f4-b877-42fe-bf9d-5a507c6faff3"},{"params":{"media":{"disableImageZooming":false},"correct":"true","behaviour":{"enableRetry":true,"enableSolutionsButton":true,"enableCheckButton":true,"confirmCheckDialog":false,"confirmRetryDialog":false,"autoCheck":false},"l10n":{"trueText":"True","falseText":"False","score":"You got @score of @total points","checkAnswer":"Check","submitAnswer":"Submit","showSolutionButton":"Show solution","tryAgain":"Retry","wrongAnswerMessage":"Wrong answer","correctAnswerMessage":"Correct answer","scoreBarLabel":"You got :num out of :total points","a11yCheck":"Check the answers. The responses will be marked as correct, incorrect, or unanswered.","a11yShowSolution":"Show the solution. The task will be marked with its correct solution.","a11yRetry":"Retry the task. Reset all responses and start the task over again."},"confirmCheck":{"header":"Finish ?","body":"Are you sure you wish to finish ?","cancelLabel":"Cancel","confirmLabel":"Finish"},"confirmRetry":{"header":"Retry ?","body":"Are you sure you wish to retry ?","cancelLabel":"Cancel","confirmLabel":"Confirm"},"question":"
Using cash flow numbers as inputs in making a capital budget decision, one of the key elements structuring the decision making process includes:<\/p>\n\n
Associated risks with a project - the level of certainty of risk regarding a project and its returns, including length of time before expected returns.<\/p>\n"},"library":"H5P.TrueFalse 1.8","metadata":{"contentType":"True\/False Question","license":"U","title":"True\/False Question"},"subContentId":"b11adfe4-1206-4d26-8830-5f86395e2411"}],"disableBackwardsNavigation":false,"randomQuestions":true,"endGame":{"showResultPage":true,"showSolutionButton":true,"showRetryButton":true,"noResultMessage":"Finished","message":"Your result:","scoreBarLabel":"You got @finals out of @totals points","overallFeedback":[{"from":0,"to":100}],"solutionButtonText":"Show solution","retryButtonText":"Retry","finishButtonText":"Finish","submitButtonText":"Submit","showAnimations":false,"skippable":false,"skipButtonText":"Skip video"},"texts":{"prevButton":"Previous question","nextButton":"Next question","finishButton":"Finish","submitButton":"Submit","textualProgress":"Question: @current of @total questions","jumpToQuestion":"Question %d of %total","questionLabel":"Question","readSpeakerProgress":"Question @current of @total","unansweredText":"Unanswered","answeredText":"Answered","currentQuestionText":"Current question","navigationLabel":"Questions"},"override":{"checkButton":true}},"library":"H5P.QuestionSet 1.20","metadata":{"contentType":"Question Set","license":"U","title":"Untitled Question Set"},"subContentId":"31649687-98f2-436f-a788-0314389bddee"},"useSeparator":"auto"}]},"library":"H5P.Column 1.18","metadata":{"contentType":"Column","license":"U","title":"Check for Understanding"},"subContentId":"6008e4cf-4420-48e1-aa69-5e09bbf14559"}],"behaviour":{"baseColor":"#1768c4","defaultTableOfContents":true,"progressIndicators":true,"progressAuto":true,"displaySummary":true,"enableRetry":true},"read":"Read","displayTOC":"Display 'Table of contents'","hideTOC":"Hide 'Table of contents'","nextPage":"Next page","previousPage":"Previous page","chapterCompleted":"Page completed!","partCompleted":"@pages of @total completed","incompleteChapter":"Incomplete page","navigateToTop":"Navigate to the top","markAsFinished":"I have finished this page","fullscreen":"Fullscreen","exitFullscreen":"Exit fullscreen","bookProgressSubtext":"@count of @total pages","interactionsProgressSubtext":"@count of @total interactions","submitReport":"Submit Report","restartLabel":"Restart","summaryHeader":"Summary","allInteractions":"All interactions","unansweredInteractions":"Unanswered interactions","scoreText":"@score \/ @maxscore","leftOutOfTotalCompleted":"@left of @max interactions completed","noInteractions":"No interactions","score":"Score","summaryAndSubmit":"Summary & submit","noChapterInteractionBoldText":"You have not interacted with any pages.","noChapterInteractionText":"You have to interact with at least one page before you can see the summary.","yourAnswersAreSubmittedForReview":"Your answers are submitted for review!","bookProgress":"Book progress","interactionsProgress":"Interactions progress","totalScoreLabel":"Total score","a11y":{"progress":"Page @page of @total.","menu":"Toggle navigation menu"}}