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what is a simple payback period formula. Between mutually exclusive projects having similar return the decision should be to invest in the project having the shortest payback period. The payback period is the amount of time needed to recover an initial investment outlay.
How To Calculate Payback Period Formula Teaching With 2e from debratouhey.com
The formula is mentioned below. Divide the cash outlay which is assumed to occur entirely at the beginning of the project by the amount of net cash inflow generated by the project per year which is assumed to be the same in every year. The simple payback period formula is calculated by dividing the cost of the project or investment by its annual cash inflows.
The WACC formula is EV x Re DV x Rd x 1-T.
Because the cash inflow is uneven the payback period formula cannot be used to compute the payback period. The formula is mentioned below. The payback period formula is one of the most popular formulas used by investors to know how long it would generally take to recoup their investments and is calculated as the ratio of the total initial investment made to the net cash inflows. However the discounted payback period would look at each of those 1000 cash flows based on its present value.
