Pay Back Period

Payback is the time it takes the cash inflows from a capital investment project to equal the cash outflows, usually expressed in years. It is the length of time before the cash inflows from an investment pay back the investment outlay.
 It is often used as a first screening method in investment appraisal.
 The payback period of a project is an important determinant of whether to undertake the project.
If cashflows are even,
Payback period (In years) = Initial Investment/Annual cash flow

Study F9 with ACCA Coach

Video Source: tutor2u

July 17, 2017

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