Payback rule

Payback rule:
It calculates the total time a company takes to calculate the return of particular investment.AdvantagesIt is an extremely easy and straightforward to use tool as the calculations are much simplerIt helps the management understand the timeframe by which the particular investment would be recouped.It helps to take simple go or no-go decisions based on the cutoff date rules.Disadvantages•It does not take into account the value of money based on time.•Payback rule tends to ignore all the cash flows happening after the payback period is over.Net Present Value:This financial analysis tools help determine the net cash flows arising out of the investmentmade in the system and interprets it in present values.Advantages