Payback period formula

For example if a company invests 300000 in a new production line and the production line then produces. Input Data in Excel.

Undiscounted Payback Period Discounted Payback Period

Cash flow per year.

. The payback period formula is pretty simple assuming the income generated from the project is constant. By substituting the numbers into the formula you divide the cost of the investment 28120 by the annual net cash flow 7600 to determine the expected payback period of. Payback Period Example.

What is the payback period. Written out as a formula the payback period calculation could also look like this. Payback Period Initial Investment Annual Payback.

- ln 1 -. Calculate Net Cash Flow. Use the PMP exam formula below to calculate the payback period of a project.

Calculate the number of years before the break-even point ie. Retrieve Last Negative Cash Flow. Lets understand the Payback Period Formula and its application with the help of the following example.

The payback period for this investment is 7 and a half years - which we calculate by dividing 3 million with 400000 using the formula shown below. The payback period formula is easy to calculate. The formula for discounted payback period is.

Say Kapoor Enterprises is considering. Any time a business purchases an expensive asset its an. The payback period formula is used for quick calculations and is generally not considered an end-all for evaluating whether to invest in a particular situation.

Payback Period Years Before Break-Even Unrecovered Amount Cash Flow in Recovery Year Here the Years Before Break-Even refers to the number of full years. The number of years that the project remains unprofitable to the company. Ln 1 discount rate The following is an example.

When applying the payback period formula to a specific investment you can take the initial cost of the investment and divide it by the investments yearly cash flow. Find Cash Flow in Next Year. Payback Period 3000000.

Discounted Payback Period. Discounted Payback Period Formula. The payback period is expressed in years and fractions of years.

Investment amount discount rate. The result of the payback period. For example imagine a.

How To Calculate The Payback Period With Excel