Paulreed: Created page with "The payback period is the length of time it takes for the initial investment to be paid out of the cash flows. To calculate what proportion of the year that the payback became pr..."

2010-12-24T13:44:49Z

Created page with "The payback period is the length of time it takes for the initial investment to be paid out of the cash flows. To calculate what proportion of the year that the payback became pr..."

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The payback period is the length of time it takes for the initial investment to be paid out of the cash flows. To calculate what proportion of the year that the payback became profitable take the last year's ending value that is negative and divide it by next year's net cash flow

i.e. 40/60 = 2/3 of the next year

Payback is easy to calculate
Benefits projects that have an earlier Payback even though other projects have longer but greater payback
Ignores time cost of money
Deals with risk

See also [[ARR]] [[IRR]] [[NPV]]

[[Category:Finance]]

Payback - Revision history

Paulreed: Created page with "The payback period is the length of time it takes for the initial investment to be paid out of the cash flows. To calculate what proportion of the year that the payback became pr..."