Simple payback period formula

Ln 1 discount rate The following is an example. Because the cash inflow is uneven the payback period formula cannot be used to compute the payback period.


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Investment Annual Net Cash Flow From Asset.

. Account and fund managers use the payback period to determine whether to. Input Data in Excel. Retrieve Last Negative Cash Flow.

We can compute the payback period by computing the. It gives a quick overview of how quickly you can expect to recover your initial investment. The payback period is calculated by dividing the amount of the investment by the annual cash flow.

The formula for discounted payback period is. To calculate using the payback period formula you can divide the initial cost of a project or investment by the amount. An example would be an initial outflow of 5000 with 1000 cash inflows per month.

For example say a housing contractor invests. Payback Period Initial Investment Annual Cash Flow. Cash flow per year.

As you can see using this payback period calculator you a. In summary the payback period is the amount of time it takes to pay back a particular investment and is typically measured in a number of years. There are two easy basis payback period formulas.

It can get a bit tricky when annual net cash flow is expected to vary from year to. Between mutually exclusive projects having. As the payback period is usually expressed in years its length is calculated by dividing the amount of investment by the annual net cash inflow.

The payback period is calculated by dividing the initial capital outlay of an investment by the annual cash flow. Payback Period Initial Investment Yearly Cash Flow. Enter financial data in your Excel worksheet.

The simple payback period formula is calculated by dividing the cost of the project or investment by its annual cash inflows. Discounted Payback Period Years Until Break-Even Unrecovered Amount Cash Flow in Recovery Year Simple Payback Period vs. Calculate Net Cash Flow.

Find Cash Flow in Next Year. Discounted Payback Period Formula. How to calculate using the payback period formula.

For example imagine a company invests 200000 in new manufacturing equipment which results in a positive cash flow of 50000 per. The payback formula is simple. Use this formula to calculate the payback period for your capital project or other long-term business investment.

Discounted Payback Period Year before the discounted payback period occurs Cumulative cash flow in year before recovery Discounted cash flow in year after recovery 2. The longer the payback period of a project the higher the risk. Cost of investment annual cash inflow from the project payback.

Acting as a simple risk analysis the payback period formula is easy to understand. Payback Period Formula Averaging Method. If your data contains both Cash Inflows and Cash Outflows calculate Net Cash flow or Cumulative Cash flow by.

The payback period is the total investment required to purchase the asset or fund the project divided by the net annual cash flow which is. Discounted Payback Period. The result of the payback period formula will match how often the cash flows are received.

- ln 1 -. Investment amount discount rate. Payback Period Initial Investment Annual Payback.

The payback period calculation is simple. Payback Period 3 1119 3 058 36 years.


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