The payback period is the length of time it takes to recoup the cost of an investment. In other words, it is the amount of time it takes for an investment to generate enough cash flows to cover its initial cost.
A payback period calculator can be used to evaluate the financial viability of an investment when looking at long term projects. This information can be used to compare different investment opportunities and make informed decisions about where to allocate resources.
To use the calculator, simply enter the total project cost and your annual cash inflow from the project.
Project cost - The project cost of an investment refers to the total estimated cost of all the resources associated with the project from its inception to its completion. This includes all direct and indirect costs associated with the project such as the costs of land, design and engineering, construction, financing, and post-completion activities such as operations and maintenance.
Annual Cash Inflow - The annual cash inflows from an investment are the total amount of cash that the investment is expected to bring in over the course of a year. When evaluating annual cash inflows, it is important to consider the investment's risk level and expected return.
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