Formula for the Payback Period.
Payback period = Initial investment / Annual Cash inflows
payback period , it is to pay your period on time jajajaja
advantages of payback period?
Something is meant by the payback period. It is the length of time taken to recover the cost of an investment. This is what is meant by the payback period.
discounted payback period
- the payback period is to dependent on cash inflows which are hard to predict. - The payback period only considers revenue, does not consider profits.
Payback period = Net Investment Annual cash returns
A discounted payback method is a formula that is used to calculate how long to recoup investments based on the discounted cash flows of the investment. It is a variation of payback period or the time it takes to recover a project investment given the discounted cash flow it has.
Method of evaluating investment opportunities and product development projects on the basis of the time taken to recoup the investment. This period is compared to the required payback period to determine the acceptability of the investment proposal. In contrast to return on investment and net present value methods, the cash inflows occurring after the payback period are not included in this method. Formula: Payback period (in years) = Initial capital investment ÷ Annual cash-flow from the investment.
The basic criticisms of the payback period method are that it does not measure the profitability of an investment and it does not consider the time value of money.
payback period
Simple payback method do not care about the time-value of money principle while discounted payback period do take care of this principle in calculation.
we only know the disadvantages: The cash flows beyond the payback period are ignored..