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The stock price and the annual dividend payment are not up for debate. .
12 The 2 Payback Periods We begin to see a difference when taking into consideration a 10 funding cost: Standard: Payback Period.1 years Discounted: Payback Period.4 years But look at the Cash Flow: Standard: Cumulated Net Cash Flow 1,968 Discounted: Cumulated Net Cash.
The expected growth rate is sweepstakes draw july 26 2015 the least accurate piece of information the formula uses. .You cant get anything of value from valueless inputs.When a company decides to retain earnings, management had better be using those earnings to grow the dividend payment in the future.The simple version of the discounted payback period formula is: This is not as much a formula, as a way of explaining that the discounted cash flow method discounts each inflow until net present value equals zero.9 Payback Period Limitations One gauss math contest waterloo limitation to the Payback Period is that it does not consider the time value of money: One today is worth more than one tomorrow (Or the other way around: One tomorrow is worth less than one today).The payback period can be applied to high quality dividend growth stocks to compare their relative investment merits.Jim estimates that the new buffing wheel will save 10 labor hours a week.Thus, at 250 a week, the buffer will have generated enough income (cash savings) to pay for itself in 40 weeks.Create a clipboard You just clipped your first slide!13 Payback Analysis: Conclusion Any mistake or oversight can be very costly: Not only can the breakeven point be further away than you think; But the cumulated cash benefit can easily be half of what you expect!A longer period leaves cash tied up in investments without the ability to reinvest funds elsewhere.Clipping is a handy way to collect important slides you want to go back to later.How is the Discounted Payback Period Derived?As you can see, there is significant variability in the payback periods of the Dividend King. .
14 Contact the expert: Eric de Diesbach Financial Management Budgeter/Forecaster Return on Investment.