Payback Period | Explained With Examples

In this lesson, we explain what the Payback Period is, why it is calculated and the Payback Period Formula. We go through some Payback Period Examples and calculations and also explain the advantages and disadvantages of the Payback Period. We also explain the comparison between the Payback Period, the Internal Rate of Return (IRR), and the Net Present Value (NPV).
Payback period in years, months, and days: • Payback Period | Expla...
Net Present Value (NPV) Calculation Example Using Table: • Net Present Value (NPV...
IRR (Internal Rate of Return) Explained with Example: • IRR (Internal Rate of ...
Profitability Index | Explained with Examples: • Profitability Index | ...
Net Present Value (NPV) Calculation Example Using Excel: • Net Present Value (NPV...
NPV & IRR | BA II PLUS (Texas Instrument): • NPV & IRR | BA II PLUS...
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[@fetcherent3934]

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[@laurentkamara2837]

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[@daneciaruiters207]

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[@JacquiMification]

How is payback calculated should a payment not be completed in the allocated years?

[@escapismcity1175]

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[@fetcherent3934]

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[@emmanuelsithole6654]

Does anyone else notice that the lecture's calculated answers are not the same when u put it using your own calculator?. even the 1st example. the real answer is 3.001 and the second example the real answer is 2.002191781

[@hm4004]

Thank you for your professional support and help. With Regards.

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[@motshabimogotsi6654]

Gosh I have amounts that need to be calculated which the table consist of the cash flows and net profit per year, do i add the net profit to the net cash flows or what? im so confused

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[@ghettovlogger8288]

What happens when your cash flows don't add up to your initial investment?

[@ziziphobusie9571]

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[@msizinxumalo6585]

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[@fetcherent3934]

in example 1, what do we do with the salvage value, the cost of capital and the tax rate?

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[@BlessedHopeChabalala]

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[@farahey_]

what if the question does not giving the cash flow?? 😔😔😔

[@lydiaamulungu9123]

I have a question can i start with year 0 with my initial cost for instance example 2 starting with 90000

[@fetcherent3934]

when doing the initial calculation, Don't we start with year zero for better results or we still get the same answers

[@thembekatg1172]

Super👍

[@monicawanyonyi2713]

What about the 10% cost of capital en 30%tax rate where is it used ,because it's also on the question

[@blxckapple4939]

What if you don't the recovery money with within the 5 years

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[@stevenjuguna4888]

Question. What was the point of the 10% cost of capital and a 30% Tax rate? It wasn't used anywhere in the calculations.

[@Counttuts]

We did not need them for calculating the Payback Period. If you were asked to calculate the NPV for instance, you would then need the cost of capital.

[@travellers111]

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[@DerekAghanama-np9ur]

Explain npv

[@evanspaulmuwonge1511]

So cute

[@johndavids4008]

what happens when the investment period ends in year 4 and in the same year the full recovery takes place . I tried that with the formulae,however i got a negative answer. what am i doing wrong?

[@Counttuts]

Good day, due to the volume of requests for help regarding student specific questions, we are not able to address them on this platform. However, you can request a session at reasonable rates with us at [e-mail] to address your challenges with the subject.

[@mohamedabdullahi8047]

@@Counttuts hi

[@raziashakk198]

What happens if the years are mor than the years given . How do you calculate that .

[@Counttuts]

That is not possible, check your calculations properly. The only other instance is not being able to recover the initial investment by the end of the investment period. In that case, there is no payback peeiod as the money will not be recovered. If you require further assistance, you can book a session here: [e-mail].

[@peterchellowilpard1972]

Harry Ltd is considering an investment in a new machine, either Machine A or Machine B. Both machines would have an expected life of five years and would be depreciated on a straight-line basis. The following information is available: (N$000) Machine A Machine B Initial cost A 400 B 560 Residual value A 50 B 60 Accounting profits; A B Year 1 60 50 Year 2 70 60 Year 3 70 80 Year 4 40 70 Year 5 30 40 Harry Ltd.’s cost of capital is 12% per annum for which the discount factors are: Year 1 0.893 Year 2 0.797 Year 3 0.712 Year 4 0.636 Year 5 0.567 how do i calculate the pay back there? and the NPV Because all i am getting is negative answers

[@Counttuts]

Good day, due to the volume of requests for help regarding student specific questions, we are not able to address them on this platform. However, you can request a session at reasonable rates with us at [e-mail] to address your challenges with the subject.

[@Amantle.Molifi]

What if they didn't give you the investment money

[@georgemichael5899]

what if the project cant pay the investment within the time period ?

[@Counttuts]

Then according to the payback period, the project should be rejected because if the entity invests in the project, it will not be able to recover its investment.

[@Rose-xo8mx]

Why dont you take depreciation in first question

[@by_nm219]

Hello sir, Do we have to round off to days or we can leave the answer in decimals for years?

[@thabelomarvellous7039]

I got 294 days

[@haneefahmusa]

Sir !..how did u get 266.19days..I got 1.998032241*10 ^-3 using d calculator

[@Counttuts]

Good day, I don't understand your calculation above, but if you follow the formula you should get the same answer I got.

[@hm4004]

@@Counttuts €132000÷€81000×365 =266.19 I hope this helps. With Regards

[@touchygoldy2919]

Greetings sir For pay back period I'm not getting the same answer as yours even after doing you case study. Thank u

[@diz533]

Too confused

[@amukelaniaffection3040]

Thank you so much