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How Calculate Payback Period. Averaging methodDivide the annualized expected cash inflows into the expected initial expenditure for the assetThis approach works best when cash flows are expected to be steady in subsequent years. Let us see an example of how to calculate the payback period when cash flows are uniform over using the full life of the asset.
Internal Rate Of Return Irr And Mirr Meaning Calculation And Use Investing Investment Analysis Business Investment from www.pinterest.com
The opening and closing period cumulative cash flows are 900000 and 1200000 respectively. Popular Course in this category. Payback Period 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.
Payback period can be calculated by dividing an initial investment by annual cash flow from a project.
Payback period Formula Total initial capital investment Expected annual after-tax cash inflow. There are two ways to calculate the payback period which are. The result is the number of years necessary to return the initial cost of the investment. The payback period refers to the amount of time it takes to recover the cost of an investment or how long it takes for an investor to hit breakeven.
