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Payback Period

Last modified by

on

Jul 24, 2020, 6:28:07 PM

Created by

on

Jul 18, 2014, 6:08:07 AM

$"Payback Period" = "Initial Investment" / ( "Periodic Cash Flow" )$

$"Initial Investment"$

$"Periodic Cash Flow"$

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This equation is used to quickly determine the length of time it will take to recoup the initial amount invested on a project or investment.

EXAMPLE

BCD housing company invests $800,000 in a real estate construction. It expects a monthly return of &12,000. Calculate the Payback period for the company.

The annual return is $144,000 (i.e. $12,000 x 12) . Therefore the payback period will be $800000/$144000 = 5.556 years.

This equation, Payback Period, is used in 1 page

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