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- Conceptually, the payback period is the amount of time between the date of the initial investment (i.e., project cost) and the date when the break-even point has been reached. The break-even point (BEP) refers to the threshold at which the amount of revenue produced by the project is equal to the associated costs.
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Feb 23, 2024 · The term payback period refers to the amount of time it takes to recover the cost of an investment. Simply put, it is the length of time an investment...
- Julia Kagan
- 2 min
Feb 5, 2024 · The payback period is a fundamental capital budgeting tool in corporate finance, and perhaps the simplest method for evaluating the feasibility of undertaking a potential investment or project. Conceptually, the payback period is the amount of time between the date of the initial investment (i.e., project cost) and the date when the break-even ...
The Payback Period shows how long it takes for a business to recoup an investment. This type of analysis allows firms to compare alternative investment opportunities and decide on a project that returns its investment in the shortest time if that criteria is important to them.
Apr 10, 2024 · Payback period can be defined as period of time required to recover its initial cost and expenses and cost of investment done for project to reach at time where there is no loss no profit i.e. breakeven point. This is a method to check the viability of projects or investments.
The payback period is a PMP® exam technique for calculating the time required to earn back a sum invested in a project. In other words, when will you reach the break-even point at which your total investment equals your total revenue? Project managers and business owners use the payback period to make investment decisions.
- Director of Product Development
Aug 3, 2023 · Key Points. • The payback period is the estimated amount of time it will take to recoup an investment or to break even. • Generally, the longer the payback period, the higher the risk. • There are two formulas for calculating the payback period: the averaging method and the subtraction method.
May 24, 2019 · Payback Period = 3 + 11/19 = 3 + 0.58 ≈ 3.6 years. Decision Rule. The longer the payback period of a project, the higher the risk. Between mutually exclusive projects having similar return, the decision should be to invest in the project having the shortest payback period.
