What is payback period? Explain the acceptance criteria using payback

Question

What is payback period? Explain the acceptance criteria using payback period method.

18 Mar 2025

Answer :

Word Count : 296

The payback period is a capital budgeting technique that measures the time required for an investment to recover its initial cost through cash inflows. It is a simple and widely used method to evaluate the risk and liquidity aspects of a project. The shorter the payback period, the quicker the investment is recovered, reducing the risk associated with long-term investments.

The payback period is calculated using the formula:

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