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Cash Payback Period Formula. Payback period which is used most often in capital budgeting is the period of time required to reach the break-even point the point at which positive cash flows and negative cash flows equal each other resulting in zero of an investment based on cash flow. The Payback Period is the time it takes an investment to generate enough cash flow to pay back the full amount of the investment.
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There are two ways to calculate the payback period which are. Payback Period formula Full Years Until Recovery Unrecovered Cost at the beginning of the Last YearCash Flow During the Last Year Capital Budgeting is one of the important responsibilities of a finance manager of a company. Conversely the longer the payback the less desirable.
The payback period is the expected number of years it will take for a company to recoup the cash it invested in a project.
Conversely the longer the payback the less desirable. The shorter the payback the more desirable the investment. The payback period is the expected number of years it will take for a company to recoup the cash it invested in a project. Because the cash inflow is uneven the payback period formula cannot be used to compute the payback period.