ECONOMICS

Detailed explanation-1: -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-2: -The payback period is calculated by dividing the amount of the investment by the annual cash flow. Account and fund managers use the payback period to determine whether to go through with an investment. One of the downsides of the payback period is that it disregards the time value of money.

Detailed explanation-3: -Payback is perhaps the simplest method of investment appraisal. The payback period is the time it takes for a project to repay its initial investment. Payback is used measured in terms of years and months, though any period could be used depending on the life of the project (e.g. weeks, months).

Detailed explanation-4: -Appraisal techniques payback period. discounted cashflow. investment risk and sensitivity analysis.