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A Refresher on Payback Method

Harvard Business Review

There are a variety of ways to calculate a return on investment (ROI) — net present value , internal rate of return , breakeven — but the simplest is payback period. What is payback period? ” The shorter the payback period, the better. A Refresher on Net Present Value.

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Hospital Budget Systems Are Holding Back Innovation

Harvard Business Review

Despite a one-year payback period and a highly positive net present value (NPV) from this investment, the department will often reject the attractive opportunity. Instead, the finance office can allow the department to keep some of the savings it created, in excess of the original acquisition cost, in future year budgets.

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Why We Need to Update Financial Reporting for the Digital Era

Harvard Business Review

Business students have traditionally considered net present value, payback period, and hurdle rates as necessary tools to determine which project to select. This notion, that risk is a desirable feature, can seem like sacrilege to anyone who’s taken an introductory finance course.

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