Payback Period (PBP) is the period of time required for the cumulative expected cash flows to equalize the initial investment or cash outflow.
1. Equivalent or constant cash inflow.
PBP = Initial Investment / Cash Inflow
2. Unequal Cash Inflow
PBP = N + [ (Initial Investment - Accumulated Cash Inflow for Year N)/Cash Flow for Year M ]
N = the number of years for the accumulated cash flows that had not exceeded the capital or investment.
M = the year where the total accumulated cash flow is equal to or more than the capital or investment.
1. Equivalent or constant cash inflow.
PBP = Initial Investment / Cash Inflow
2. Unequal Cash Inflow
PBP = N + [ (Initial Investment - Accumulated Cash Inflow for Year N)/Cash Flow for Year M ]
N = the number of years for the accumulated cash flows that had not exceeded the capital or investment.
M = the year where the total accumulated cash flow is equal to or more than the capital or investment.
No comments:
Post a Comment