Payback Period

# Payback Period - Payback Period Payback period is the time...

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Payback Period Payback period is the time in which the initial cash outflow of an investment is expected to be recovered from the cash inflows generated by the investment. It is one of the simplest investment appraisal techniques. Formula The formula to calculate payback period of a project depends on whether the cash flow per period from the project is even or uneven. In case the cash flow per period are even, the formula to calculate payback period is: Payback Period = Initial Investment Cash Inflow per Period When cash inflows are uneven, we need to calculate the cumulative net cash flow for each period and then use the following formula for payback period: Payback Period = A + B C In the above formula, A = Last period with a negative cumulative cash flow; B = Absolute value of cumulative cash flow at the end of the period A; C = Actual Cash Flow during the period after A Both of the above situations are applied in the following examples. Decision Rule

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## This note was uploaded on 04/03/2012 for the course ACCT 275 taught by Professor Stangota during the Spring '09 term at Rutgers.

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Payback Period - Payback Period Payback period is the time...

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