ECONOMICS

Detailed explanation-1: -For calculating payback period for an annuity, all cash flows must be adjusted for time value of money. If a project’s payback period is less than the maximum acceptable payback period, we would accept it. If a project’s payback period is greater than the maximum acceptable payback period, we would reject it.

Detailed explanation-2: -Payback period is defined as the number of years required to recover the original cash investment. In other words, it is the period of time at the end of which a machine, facility, or other investment has produced sufficient net revenue to recover its investment costs.

Detailed explanation-3: -Detailed Solution. Explanation: The payback method simply projects incoming cash flows from a given project and identifies the break-even point between profit and paying back invested money for a given process. Explanation: The payback period refers to the amount of time it takes to recover the cost of an investment.

Detailed explanation-4: -What is a payback period? The payback period is the amount of time a capital project requires to generate enough profit to pay back the initial investment a company or financial institution made to the project. This is a factor that business owners and investors can use to determine which projects to choose.