Payback period and other investment tools
Payback period and its role in the investment process
It is no secret to anyone that today the reality of modern society in any country directly depends on its investment climate, the economic attractiveness of enterprises, the employment of the population and others, at firstview does not relate to the ordinary citizen indicators. The modern system of doing business, and in particular its main constituent element, providing the meansthe entire economy, a long period of time is marked by pragmatism. This is, of course, investment. The depth of this approach is determined by the payback period along with its mathematical indicators, such as net present value of income, profitability ratio and other coefficient rates of return of a particular project.That, in turn, allows investors to avoid unnecessary risks, and creative, individual and even revolutionary ideas - to die from underfunding. In general, the trends of today's investment market suggest that the main motivational factor for a modern investor is the payback period of the project, which makes it possible in the shortest possible time to return the funds to the investor. Well, innovative ideas should adapt to the market and its trends. From an economic point of view, the payback period- This is the period of time for which the total income of the enterprise will be able to reach the amount of invested capital It is determined by the formula:
T total = KC-S, where
K - capital investments;
C - the annual cost of production;
C - cost of output.
Other criteria for assessing investment attractiveness
In addition to this motivational factor in attracting funds from investors, the investment market is also guided by such equally important criteria:
- geopolitical situation in the world;
- the viability of the project itself;
- financial position of the investment market;
- professional interest of the contributor, etc.
The payback period of capital inmotions
These factors are universal methods for assessing the investment attractiveness of a project. They can give a concrete answer about how profitable it is to invest in a particular business. Mathematical coefficients selected for each of the criteria will accurately estimate most of the project’s development paths and calculate its payback period, annual production cost, production costs, etc. However, the calculation of the investment attractiveness of capital investments in an enterprise for its reconstruction, purchase of new equipment and other modernization operations will take into account several different criteria, namely:
Thus, for the modern investor every day more and more risks can be reduced with the help of a calculator and basic knowledge of mathematics.