The payback period is the period of time it takes an investment to generate sufficient cash flows to enable the project to recover its initial cost.
The payback period is the time required to recoup the cost of an investment or the amount of time required for an investor to break even.
Longer payback times are unfavorable, while shorter paybacks make investments more appealing.
Divide the investment amount by the annual cash flow to determine the payback period.
The payback period is a factor that account and fund managers consider when deciding whether to proceed with an investment.
The payback period's disregard for the time value of money is one of its drawbacks.
Hence, The payback period is the period of time it takes an investment to generate sufficient cash flows to enable the project to recover its initial cost.
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