EDP Notes

ADVANTAGES
 It is simple to understand and easy to apply.
 It is very important for cash forecasting, budgeting and cash flow analysis.
 It minimizes the possibility of losses through obsolescence.
 It takes into account liquidity.
 It is easier for projects yielding returns in initial years
 DISADVANTAGES

 It ignores the time value of money.
 It completely ignores cash inflows after the payback period.
 This method does not measures profitability of projects..It insist only on recovery of the
cost of the project.
 It does not measure the rate of return.
 It may become misleading because it is based on a single factor.