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PAYBACK PERIOD
One of the simplest investment appraisal techniques is the
payback period. Payback technique states how long does it
take for the project to generate sufficient cash-flow to cover
the initial cost of the project.
i = Discounting rate
For Example,
XYZ Inc. is starting the project at cost of $ 100,000. The
project will generate cash-flow of $ 40,000 , $ 50,000 & $
50,000 in year 1, year 2 & year 3 respectively. Company’s
WACC is 10%. Find out NPV.
= $ 115,251.68 – $ 100,000