How to Calculate Payback Period and Discounted Payback Period

[@RyanOConnellCFA]

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[@tylermilsop]

These video series you provide illustrating how to use excel are hidden gems.

[@RyanOConnellCFA]

I really appreciate the feedback Tyler!

[@santoshsk4651]

Thank you for the quick and to-the-point explanation.

[@RyanOConnellCFA]

You're welcome!

[@Starbird-fv5pq]

Awsome,understood the concept..well explained Sir!

[@HamzaHussain-c3v]

very Well explained..KEEP IT UP

[@RyanOConnellCFA]

Thank you, I will!

[@truedisciple2897]

Great explanation.

[@RyanOConnellCFA]

Thank you!

[@chandangarg1151]

Thankyou

[@RyanOConnellCFA]

You're welcome!

[@Area-ix6kb]

Thanks

[@RyanOConnellCFA]

My pleasure

[@ksawerytyzo2533]

Thanks!

[@RyanOConnellCFA]

You're welcome!

[@JonZ1930]

Hi Ryan, If I am looking to invest in a start-up x amount of $$, to find my payback period would I need the projected Net cashflows of the start-up to find my payback period? also, how do you add the interest on the money lent and isn't the catalyst in this scenario how much and when the startup can begin to pay me back on the borrowed amount?

[@RyanOConnellCFA]

Hello! Yes, to determine the payback period for your investment in a startup, you will need the projected net cash flows to calculate the time it will take to recover your initial investment. When considering the discounted payback period, you would discount these cash flows using a chosen rate of return to account for the time value of money. The catalyst for repayment indeed depends on the startup's ability to generate enough cash to begin making payments to you according to the agreed-upon schedule.

[@kelompok2pengantarakuntans371]

What if the fifth year is the last negative cash flow in the communicative discounted cash flow, and there are no more years, should I divide it by the discounted cash flow of the same year (year 5) or do I divide it by 0?

[@RyanOConnellCFA]

You should handle every cash flow the same way whether it is positive or negative, by dividing the cash flow by (1 + discount rate)^years

[@kelompok2pengantarakuntans371]

@@RyanOConnellCFATHANK YOU SO MUCH. But, can you give me an example?

[@kelompok2pengantarakuntans371]

@@RyanOConnellCFA Projects with an initial cash outlay of $400,000 are projected to record annual cash inflows of $50,000 each; $50,000; $100,000; $150,000; $200,000. What is the payback period for the project (12% discount rate). Can you answer this for me?

[@RyanOConnellCFA]

@@kelompok2pengantarakuntans371 You should be able to follow the logic in this video exactly to answer this question. If you follow the steps, what do you get for the answer?

[@kelompok2pengantarakuntans371]

@@RyanOConnellCFA 5 years or 5,3 years? and this project will be rejected

[@GorillaAthletics-lq3si]

good looks slime

[@RyanOConnellCFA]

Appreciate it! First time I've been called "slime" lol

[@mateador]

Thanks Luka Doncic

[@RyanOConnellCFA]

That is one of the best complements I have received 😎

[@talkswithbhagawati849]

payback period might be 3.14 instead of 4.86

[@RyanOConnellCFA]

Can you show us our math that led you to believe that?