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Payback period is how long it takes for an investment to recover its initial cost through cash inflows. Simple but ignores time value of money; discounted payback is more accurate.
Формула
Payback = Year before recovery + (Unrecovered cost / Cash flow in recovery year)
Водич корак по корак
- 1List cash inflows by year
- 2Accumulate until initial investment is recovered
- 3Calculate exact time within the recovery year
Worked Examples
Инпут
Initial: $10k, Flows: $3k, $4k, $5k
Резултат
Payback ≈ 2.2 years
Recovers in early year 3
Common Mistakes to Avoid
- ✕Ignoring time value of money
- ✕Not handling cash inflows before payback
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