EDP Notes

The most important and popular of these can be classified into two broad categories as follows:
NON-DISCOUNTING TECHNIQUES OR TRADITIONAL METHODS: - It does not
take into consideration the time value of money. Important traditional methods may be
discussed as follows:
A) URGENCY METHOD: - Urgency or degree of necessity plays an important role and project
that cannot be postponed is undertaken first.
Merits
 It is a very simple technique.
 It is useful in case of short term projects requiring lesser investment.
Demerits
 Selection is not made on the basis of economical consideration but just on the basis of
situation.
 It is not based on scientific analysis.
B) PAY BACK METHOD: It is cash based technique. It is a period over which the investment
would be paid back. It is a breakeven point of the project, where the accumulated returns equal
investment. It is also called ‘pay-out’ or ‘pay-off’ period or ‘recoupment’ or ‘replacement
period’.