Measures Part 1
Payback Period
The payback period is so basic that we won’t actually create a model for it. What it says is how long it takes until your original investment is paid back. So if you put 1000 dollars down, and get 500 dollars in year 1,2 and 3 your payback period is 2. You don’t use any discounting for the payback period.
Profitability Index
The profitability index is defined as follows:
Equation
Profitability Index = Present Value of Inflows/Present Value of Outflows
Challenge
Create a profitability index function.