The length of time required to recover the cost of an investment. Calculated as

''Pay back period'' = $\LARGE \frac{Cost of Project}{Annual Cash Inflows}$

Using the following example:
|Project|$C_0$|$C_1$|$C_2$|$C_3$|Payback|NPV at 10%|h
|A|-2000|500|500|5000|3|+2624|
|B|-2000|500|1800|0|2|-58|
|C|-2000|1800|500|0|2|+50|

# The payback rule ignores all cash flows after the cut off date.
# The payback rule gives equal weight to all cash flows before the cutoff date.
bag
finance_public
created
Sat, 29 Jan 2011 15:42:34 GMT
creator
dirkjan
modified
Sat, 29 Jan 2011 15:42:34 GMT
modifier
dirkjan
tags
M12
Principles of Corporate Finance
Term
creator
dirkjan