Payback Period | Explained With Examples

In this lesson, we explain what the Payback Period is, why it is calculated and the Payback Period Formula. We go through some Payback Period Examples and calculations and also explain the advantages and disadvantages of the Payback Period. We also explain the comparison between the Payback Period, the Internal Rate of Return (IRR), and the Net Present Value (NPV).
Payback period in years, months, and days: • Payback Period | Expla...
Net Present Value (NPV) Calculation Example Using Table: • Net Present Value (NPV...
IRR (Internal Rate of Return) Explained with Example: • IRR (Internal Rate of ...
Profitability Index | Explained with Examples: • Profitability Index | ...
Net Present Value (NPV) Calculation Example Using Excel: • Net Present Value (NPV...
NPV & IRR | BA II PLUS (Texas Instrument): • NPV & IRR | BA II PLUS...
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[@nihadrzk3632]

Your explanation is the best, thank you !

[@hm4004]

Thank you for your professional support and help. With Regards.

[@simransingh4031]

Thank you so much. Extremely helpful🙏🙌

[@fetcherent3934]

you helped me in financial accounting and i nailed the paper

[@laurentkamara2837]

thank so much for this teaching it helps me understand the payback period very well

[@linneajohansson3796]

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[@fanashaa3130]

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[@amukelaniaffection3040]

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[@motshabimogotsi6654]

Gosh I have amounts that need to be calculated which the table consist of the cash flows and net profit per year, do i add the net profit to the net cash flows or what? im so confused

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[@fetcherent3934]

in example 1, what do we do with the salvage value, the cost of capital and the tax rate?

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[@thembekatg1172]

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[@deborahmwanganjye846]

Thank you so much for this content.

[@lydiaamulungu9123]

I have a question can i start with year 0 with my initial cost for instance example 2 starting with 90000

[@nancynasimiyu5466]

Thanks

[@ghettovlogger8288]

What happens when your cash flows don't add up to your initial investment?

[@manjipulse5144]

awesome

[@fetcherent3934]

when doing the initial calculation, Don't we start with year zero for better results or we still get the same answers

[@JacquiMification]

How is payback calculated should a payment not be completed in the allocated years?

[@escapismcity1175]

I'm writing tomorrow and I still don't know 🤕

[@queeniyah4514]

Thank you so much🙏🏽❤️

[@travellers111]

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[@keesharawf2654]

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[@farahey_]

what if the question does not giving the cash flow?? 😔😔😔

[@monicawanyonyi2713]

What about the 10% cost of capital en 30%tax rate where is it used ,because it's also on the question

[@stevenjuguna4888]

Question. What was the point of the 10% cost of capital and a 30% Tax rate? It wasn't used anywhere in the calculations.

[@Counttuts]

We did not need them for calculating the Payback Period. If you were asked to calculate the NPV for instance, you would then need the cost of capital.

[@by_nm219]

Hello sir,
Do we have to round off to days or we can leave the answer in decimals for years?

[@blxckapple4939]

What if you don't the recovery money with within the 5 years

[@johndavids4008]

what happens when the investment period ends in year 4 and in the same year the full recovery takes place . I tried that with the formulae,however i got a negative answer. what am i doing wrong?

[@Counttuts]

Good day, due to the volume of requests for help regarding student specific questions, we are not able to address them on this platform. However, you can request a session at reasonable rates with us at [e-mail] to address your challenges with the subject.

[@mohamedabdullahi8047]

@@Counttuts hi

[@georgemichael5899]

what if the project cant pay the investment within the time period ?

[@Counttuts]

Then according to the payback period, the project should be rejected because if the entity invests in the project, it will not be able to recover its investment.

[@raziashakk198]

What happens if the years are mor than the years given . How do you calculate that .

[@Counttuts]

That is not possible, check your calculations properly. The only other instance is not being able to recover the initial investment by the end of the investment period. In that case, there is no payback peeiod as the money will not be recovered. If you require further assistance, you can book a session here: [e-mail].

[@emmanuelsithole6654]

Does anyone else notice that the lecture's calculated answers are not the same when u put it using your own calculator?. even the 1st example. the real answer is 3.001 and the second example the real answer is 2.002191781

[@DerekAghanama-np9ur]

Explain npv

[@Rose-xo8mx]

Why dont you take depreciation in first question

[@Amantle.Molifi]

What if they didn't give you the investment money

[@haneefahmusa]

Sir !..how did u get 266.19days..I got 1.998032241*10 ^-3 using d calculator

[@Counttuts]

Good day, I don't understand your calculation above, but if you follow the formula you should get the same answer I got.

[@hm4004]

@@Counttuts
€132000÷€81000×365
=266.19
I hope this helps.
With Regards

[@touchygoldy2919]

Greetings sir
For pay back period I'm not getting the same answer as yours even after doing you case study.
Thank u

[@evanspaulmuwonge1511]

So cute

[@peterchellowilpard1972]

Harry Ltd is considering an investment in a new machine, either Machine A or Machine B. Both machines would have an expected life of five years and would be depreciated on a straight-line basis.
The following information is available: (N$000)
Machine A Machine B
Initial cost A 400 B 560
Residual value A 50 B 60
Accounting profits;
A B
Year 1 60 50
Year 2 70 60
Year 3 70 80
Year 4 40 70
Year 5 30 40
Harry Ltd.’s cost of capital is 12% per annum for which the discount factors are:
Year 1 0.893
Year 2 0.797
Year 3 0.712
Year 4 0.636
Year 5 0.567
how do i calculate the pay back there? and the NPV Because all i am getting is negative answers

[@Counttuts]

Good day, due to the volume of requests for help regarding student specific questions, we are not able to address them on this platform. However, you can request a session at reasonable rates with us at [e-mail] to address your challenges with the subject.

[@thabelomarvellous7039]

I got 294 days

[@diz533]

Too confused

[@fetcherent3934]

Thank you so much