Search results
Apr 10, 2024 · Payback Period Formula = Total initial capital investment /Expected annual after-tax cash inflow = $ 20,00,000/$2,21000 = 9 Years(Approx) Advantages. Some important advantages of the concept of payback period in excel are as follows: It is easy to calculate.
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.
Payback period is a financial or capital budgeting method that calculates the number of days required for an investment to produce cash flows equal to the original investment cost. In other words, it’s the amount of time it takes an investment to earn enough money to pay for itself or breakeven.
Last Updated: September 16, 2023. What Is The Payback Period? The payback period is an accounting metric in capital budgeting that refers to the amount of time it takes to recover the funds invested in a project or reach a break-even point.
Payback period in capital budgeting refers to the time required to recoup the funds expended in an investment, or to reach the break-even point. [1] For example, a $1000 investment made at the start of year 1 which returned $500 at the end of year 1 and year 2 respectively would have a two-year payback period.
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.
Oct 17, 2023 · What is the Payback Period? The payback period is a simple measure of how long it takes for a company to recover its initial investment in a project from the project’s expected future cash inflows. It measures the liquidity of a project rather than its profitability.
