ECONOMICS

Detailed explanation-1: -This method is also known as pay out, pay off or recoupment period method. Under this method, the original investment of the project should be received back out of the implementation of the project as early as possible.

Detailed explanation-2: -Using the Payback Method It is easy to calculate and is often referred to as the “back of the envelope” calculation. Also, it is a simple measure of risk, as it shows how quickly money can be returned from an investment.

Detailed explanation-3: -Simple payback time is defined as the number of years when money saved after the renovation will cover the investment.

Detailed explanation-4: -Payback Period for Capital Budgeting The payback period represents the number of years it takes to pay back the initial investment of a capital project from the cash flows that the project produces. The capital project could involve buying a new plant or building or buying a new or replacement piece of equipment.