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Calculation of Pay back period
Remmy
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How do we calculate payback period when the returns / cashflows are different each year? (...) Read more? Sign up for free
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Comment on payback period Tecnique
Tichakunda Gumbo
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Your payback period calculation formular is somehow too generalised in that it assumes that all projects will have equal annual cashflows.What about those with different annual cashflows.?
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Payback Period if annual cashflows vary?
Jaap de Jonge, Editor, Netherlands
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In case the annual cashflows are not the same, the formula is still valid.
Suppose the same project is costing $200.000, but now the annual cashflows are: $30.000 (yr 1), $40.000 (yr 2), $50.000 (yr 3), $40.000 (yr 4), $20.000 (yr 5), $20.000 (yr 6), and $50.000 (yr 7).
After 6 years the total of all cash inflows equals the costs (investments) in the project. Therefore the Payback Period of our project is 6 years.
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Good resource
Peter Hansen
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I found that this was a very useful website with relevant explanations and examples. Keep up the good work!
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Payback Period
Mukela Namushi Mubano, Accountant, Zambia, Member
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Many Terms
Azzam Ali, Analyst, Saudi Arabia, Member
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Special Interest Group Leader
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Summary
| Calculation of Pay back period |
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