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Payback Period Formula

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Payback Period is a financial metric used to evaluate the time it takes for an investment to generate enough cash flow to recover its initial cost. Check FAQs

PBP = \frac{Initial Invt}{C f}

PBP - Payback Period?Initial Invt - Initial Investment?C_f - Cashflow per Period?

Payback Period Example

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Here is how the Payback Period equation looks like with Values.

Here is how the Payback Period equation looks like with Units.

Here is how the Payback Period equation looks like.

1.3333 = \frac{2000}{1500}

1.3333 = \frac{2000}{1500}

1.3333 = \frac{2000}{1500}

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Payback Period Solution

Follow our step by step solution on how to calculate Payback Period?

FIRST Step Consider the formula

PBP = \frac{Initial Invt}{C f}

Next Step Substitute values of Variables

∴

PBP = \frac{2000}{1500}

Next Step Prepare to Evaluate

∴

PBP = \frac{2000}{1500}

Next Step Evaluate

∴

PBP = 1.33333333333333

LAST Step Rounding Answer

∴

PBP = 1.3333

Payback Period Formula Elements

Variables

Payback Period

Payback Period is a financial metric used to evaluate the time it takes for an investment to generate enough cash flow to recover its initial cost.

Symbol: PBP

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Payback Period

Initial Investment

The Initial Investment is the amount required to start a business or a project.

Symbol: Initial Invt

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Initial Investment

Cashflow per Period

Cashflow per Period refers to the amount of money that is either received or paid out at regular intervals.

Symbol: C_f

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Cashflow per Period

Other formulas in Capital Budgeting category

Go Cost of Retained Earnings

C RE = (\frac{D}{P c}) + g

Go Cost of Debt

R d = Int.E \cdot (1 - T r)

Go After-Tax Cost of Debt

ATCD = (R f + CS P) \cdot (1 - T r)

Go Accounting Rate of Return

ARR = (\frac{AP}{Initial Invt}) \cdot 100

How to Evaluate Payback Period?

Payback Period evaluator uses Payback Period = Initial Investment/Cashflow per Period to evaluate the Payback Period, The Payback Period formula is defined as a financial metric used to assess the time it takes for an investment to generate cash flows sufficient to cover its initial cost. Payback Period is denoted by PBP symbol.

How to evaluate Payback Period using this online evaluator? To use this online evaluator for Payback Period, enter Initial Investment (Initial Invt) & Cashflow per Period (C_f) and hit the calculate button.

FAQs on Payback Period

What is the formula to find Payback Period?

The formula of Payback Period is expressed as Payback Period = Initial Investment/Cashflow per Period. Here is an example- 1.333333 = 2000/1500.

How to calculate Payback Period?

With Initial Investment (Initial Invt) & Cashflow per Period (C_f) we can find Payback Period using the formula - Payback Period = Initial Investment/Cashflow per Period.

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Payback Period Formula

Payback Period Example

Payback Period Solution

Payback Period Formula Elements

Other formulas in Capital Budgeting category

How to Evaluate Payback Period?

FAQs on Payback Period

Variable Name