PAYBACK PERIOD

The Payback Period is the time required for an investment to recover its original cost from the cash inflows generated by that investment.

In simple words, it tells us how long it will take to get our invested money back.

A). EVEN CASH FLOWS

if the Answer of Formula is in Points **** Convertion of Point into Months (.85*12 = 10 month)

Example # 1

A company purchases machinery for PKR 1,200,000. The machinery generates annual net cash inflows of PKR 300,000.

B). UNEVEN CASH FLOWS

We prepare a column of Cummulative Cash Flow