What is payback period?

The payback period helps to determine
the length of time required to recover the initial cash flow outlay in the
project or investment, simply it is the method used to calculate the time
required the earn back the cash invested through the successful cash inflows

Why payback is important

The payback period is an effective
measure of investment risk. The period with a shorter payback period has less
risk than with the project or investment with longer payback period. The payback
period is often used when liquidity is an important criterion to choose a

 Payback in capital budgeting

In capital budgeting, the payback
period is the selection criteria, or deciding factor, that most business rely
on to choose among potential capital projects. Small business and large alike
tend to focus on project with a likelihood or faster, more profitable payback.

template includes regular and discount payback

The regular payback period is number of
years necessary to recover the funds invested without taking the time value
into accounts

The discounted payback is number of
years necessary to recover the funds invested taking into consideration the
time value of the money

 Key inputs in the green tabs

 Fill the green cells only

 Key outcome in the dark blue tabs             

The inputs in the green cells will dynamically
flow into the following below:

-Regular payback period

-Discounted payback period


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