Payback Period Calculator. The Payback Period is the time that it takes for a Capital Budgeting project to recover its initial cost. Usually, the project with the quickest payback is preferred. In this calculation, the Net cash flows (NCF) of the project must first be estimated. Payback period can be calculated by dividing the total investment cost by the annual net cash flow. Here is the simple online calculator to calculate the payback period by giving the initial investment amount and the annual cash flow.
https://www.easycalculation.com/budget/capital-budget-payback-period.php
Discounted Payback Period (DPP) = A + (B / C) Where, A - Last period with a negative discounted cumulative cash flow B - Absolute value of discounted cumulative cash flow at the end of the period A C - Discounted cash flow during the period after A. An initial investment of Rs.50000 is expected to generate Rs.10000 per year for 8 years.
https://www.easycalculation.com/budget/learn-discounted-payback-period.php
First, the time value of money is not considered when you calculate payback period. In other words, no matter which year you receive a cash flow, it is given the same weight as the first year. This flaw overstates the time to recover the initial investment. A second flaw is the lack of consideration of cash flows beyond the payback period.
https://www.thebalance.com/discounted-payback-period-as-a-capital-budgeting-method-392913
The calculation for discounted payback period is a bit different than the calculation for regular payback period because the cash flows used in the calculation are discounted by the weighted average cost of capital used as the interest rate and the year in which the cash flow is received.
https://www.thebalance.com/discounted-payback-period-as-a-capital-budgeting-method-392913
Discounted Payback Period (DPP) = A + (B / C) Where, A - Last period with a negative discounted cumulative cash flow B - Absolute value of discounted cumulative cash flow at the end of the period A C - Discounted cash flow during the period after A. Example: An initial investment of Rs.50000 is expected to generate Rs.10000 per year for 8 years.
https://www.easycalculation.com/budget/learn-discounted-payback-period.php
To Find, Discounted Payback Period (DPP) Solution: Last period with a negative discounted cumulative cash flow (A) = 7 Absolute value of discounted cumulative cash flow at the end of the period (B) = 2878.04 Discounted cash flow during the period after (C) = 4339.26 Discounted Payback Period = A + (B / C) = 7 + (2878.04 / 4339.26) = 7.66 years.
https://www.easycalculation.com/budget/learn-discounted-payback-period.php
Payback period. Payback period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point. 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.
https://en.wikipedia.org/wiki/Payback_period
The time value of money is not taken into account. Payback period intuitively measures how long something takes to pay for itself.. All else being equal, shorter payback periods are preferable to longer payback periods.
https://en.wikipedia.org/wiki/Payback_period
Payback Period. The Payback Period represents the amount of time that it takes for a Capital Budgeting project to recover its initial cost. The use of the Payback Period as a Capital Budgeting decision rule specifies that all independent projects with a Payback Period less than a specified number of years should be accepted.
http://www.zenwealth.com/BusinessFinanceOnline/CB/PaybackPeriod.html
To begin the calculation of the Payback Period for project A let's add an additional column to the above table which represents the Net Cash Flow (NCF) for the project in each year.
http://www.zenwealth.com/BusinessFinanceOnline/CB/PaybackPeriod.html
how to find regular payback period
Payback period can be calculated by dividing the total investment cost by the annual net cash flow. The regular payback period can be calculated by dividing the total investment cost by the annual net cash flow.