BEYOND PAYBACK: HOW THE MONEY WORKS

摘要

Industrial decision-makers everywhere depend onrn"payback" as a way to evaluate proposed investmentsrnin their facilities. Compared to more sophisticatedrnfinancial measures such as net present value andrninternal rate of return, payback is comparativelyrnsimple to understand and calculate - perfect forrn"back of the envelope" analysis. But its inherentrnsimplicity also creates problems. As a managerialrndecision tool, payback remains grossly inexact andrnmisapplied, especially when thousands or evenrnmillions of dollars are at stake. As this articlernexplains, the “save-or-buy” calculation provides arnbetter way.