ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -The Payback period is the amount of ome it takes to recover or pay back the inioal investment. If the payback period is less than a pre-‐specified length of ome (which can be subjecove), you accept the project. Otherwise, you reject the project. – The payback rule is used by many companies because of its simplicity.

Detailed explanation-3: -What is a payback period? The payback period in capital budgeting is the amount of time it takes for your company to recover the cost of acquiring one customer. For example, a customer that costs $350 to acquire and contributes $25/month, or $300/year, has a payback period of 13.9 months.

Detailed explanation-4: -The definition of the payback period for capital budgeting purposes is straightforward. 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.