Difference between revisions of "Payback period"

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:[[Payback period]]. The length of time required for an investment's cash flows to cover its cost.
 
:[[Payback period]]. The length of time required for an investment's cash flows to cover its cost.
 
According to [[Managing Quality by Foster (6th edition)]],
 
According to [[Managing Quality by Foster (6th edition)]],
:Payback period. The amount of time required to recoup an investment. Usually associated with projects where costs are saved.
+
:[[Payback period]]. The amount of time required to recoup an investment. Usually associated with projects where costs are saved.
  
  

Latest revision as of 09:03, 6 June 2020

Payback period is the number of years it takes a firm to recover its project investment. Payback does not capture a project's entire cash flow stream and is thus not the preferred evaluation method. Note, however, that the payback does measure a project's liquidity, so many firms use it as a risk measure.


Definitions

According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),

Payback period. The number of years it takes a firm to recover its project investment. Payback does not capture a project's entire cash flow stream and is thus not the preferred evaluation method. Note, however, that the payback does measure a project's liquidity, so many firms use it as a risk measure.

According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),

Payback period. The length of time required for an investment's cash flows to cover its cost.

According to Managing Quality by Foster (6th edition),

Payback period. The amount of time required to recoup an investment. Usually associated with projects where costs are saved.


Related concepts

Related lectures