Understanding Non-Discounted Payback and Accounting Rate of Return Models

The video tutorial explains the payback period, which is the time it takes to recover the capital invested in a project. It covers both discounted and undiscounted payback models, emphasizing the importance of discounting future cash flows due to inflation and opportunity costs. The tutorial also introduces the accounting rate of return, calculated by dividing average net profit by average investment, and highlights its use in evaluating potential projects.

What is the definition of payback in the context of investment?

How do you calculate the payback period?

What is the difference between discounted and undiscounted payback?

Explain how the accounting rate of return is calculated.

Why is it important to consider average net profit and average investment in calculations?