BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -The payback method answers the question “how long will it take to recover my initial $50, 000 investment?” With annual cash inflows of $10, 000 starting in year 1, the payback period for this investment is 5 years (= $50, 000 initial investment ÷ $10, 000 annual cash receipts).

Detailed explanation-2: -The term payback period refers to the amount of time it takes to recover the cost of an investment. Simply put, it is the length of time an investment reaches a breakeven point. People and corporations mainly invest their money to get paid back, which is why the payback period is so important.

Detailed explanation-3: -To calculate the payback period you can use the mathematical formula: Payback Period = Initial investment / Cash flow per year For example, you have invested Rs 1, 00, 000 with an annual payback of Rs 20, 000. Payback Period = 1, 00, 000/20, 000 = 5 years.

Detailed explanation-4: -Payback period can be defined as period of time required to recover its initial cost and expenses and cost of investment done for project to reach at time where there is no loss no profit i.e. breakeven point.

Detailed explanation-5: -2.3. PBP is defined by calculating the time needed (usually expressed in years) to recover an investment. Thus, a break-even point of investment is determined.