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Payback period = Initial investment / Annual cash flow. The calculation can also be performed using a payback period calculator or in Excel for the provided reference values. More sophisticated methods of capital budgeting can be executed in Excel.
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.
Formula. The simple payback period formula is calculated by dividing the cost of the project or investment by its annual cash inflows. As you can see, using this payback period calculator you a percentage as an answer.
10 maj 2024 · The payback period formula determines how long it takes for a business to recoup its initial investment. Learn how to calculate it plus see an example.
10 wrz 2024 · • 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. • To calculate the payback period using the averaging method, you divide the Initial Investment by Yearly Cash Flow.
17 paź 2023 · The formula for payback period is: Payback Period (yrs.) = Initial Investment / Annual Cash Inflow. Where: Initial Investment = the upfront cost of the project. Annual Cash Inflow = the annual net cash flow expected from the project.
5 lut 2024 · In its simplest form, the formula to calculate the payback period involves dividing the cost of the initial investment by the annual cash flow. Payback Period = Initial Investment ÷ Cash Flow Per Year. Where: Initial Investment → Cash Outflow in Period 0. Cash Flow Per Year → Annual Cash Flow Generated. Illustrative Payback Period Example.
