Payback - Revision history

imported>Doug Williamson: Expand definition.

2021-08-07T01:26:14Z

Expand definition.

← Older revision		Revision as of 01:26, 7 August 2021
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	''Investment appraisal.''		''Investment appraisal.''

	~~Payback analysis~~ is a ~~method of~~ investment ~~appraisal in which~~ the cumulative net total of investment (one or more outflows - negative amounts) and return (inflows - positive amounts) ~~is projected~~ in order to determine when that net total is zero.		How long is it before our original investment in a project or asset has been paid back?

			The faster the investment is paid back, the shorter the payback period, and the more attractive the opportunity, based on its payback period alone.


			Payback analysis forecasts the cumulative net total of investment (one or more outflows - negative amounts) and return (inflows - positive amounts) in order to determine when that net total is zero.

	This is the time when the initial investment has been fully recovered.		This is the time when the initial investment has been fully recovered.

imported>Doug Williamson: Add link.

2020-12-11T13:38:44Z

Add link.

← Older revision		Revision as of 13:38, 11 December 2020
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	* [[Discounted payback]]		* [[Discounted payback]]
	* [[Investment appraisal]]		* [[Investment appraisal]]
			* [[Project appraisal]]
	* [[Time value of money]]		* [[Time value of money]]

	[[Category:Corporate_finance]]		[[Category:Corporate_finance]]

imported>Doug Williamson: Categorise.

2019-05-08T08:19:54Z

Categorise.

← Older revision		Revision as of 08:19, 8 May 2019
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	* [[Investment appraisal]]		* [[Investment appraisal]]
	* [[Time value of money]]		* [[Time value of money]]

			[[Category:Corporate_finance]]

imported>Doug Williamson: Add links.

2019-05-05T12:30:29Z

Add links.

← Older revision		Revision as of 12:30, 5 May 2019
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	== See also ==		== See also ==
			* [[Discounted cash flow]]
	* [[Discounted payback]]		* [[Discounted payback]]
	* [[Investment appraisal]]		* [[Investment appraisal]]
			* [[Time value of money]]

imported>Doug Williamson: Layout.

2019-05-05T12:29:48Z

Layout.

← Older revision		Revision as of 12:29, 5 May 2019
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	For example a proposal requires an initial investment of $100m at Time 0 years, and will then pay out annual amounts of $10m, $20m, $30m, $40m, $50m and $60m at future Times 1 to 6 years respectively.		For example, a proposal requires an initial investment of $100m at Time 0 years, and will then pay out annual amounts of $10m, $20m, $30m, $40m, $50m and $60m at future Times 1 to 6 years respectively.

imported>Doug Williamson: Add heading.

2019-05-05T12:29:24Z

Add heading.

← Older revision		Revision as of 12:29, 5 May 2019
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			''Investment appraisal.''

	Payback analysis is a method of investment appraisal in which the cumulative net total of investment (one or more outflows - negative amounts) and return (inflows - positive amounts) is projected in order to determine when that net total is zero.		Payback analysis is a method of investment appraisal in which the cumulative net total of investment (one or more outflows - negative amounts) and return (inflows - positive amounts) is projected in order to determine when that net total is zero.

imported>Doug Williamson: Removed hence and replaced with .. at future Times 1 to 6 years respectively.

2015-05-30T16:05:15Z

Removed hence and replaced with .. at future Times 1 to 6 years respectively.

← Older revision		Revision as of 16:05, 30 May 2015
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	For example a proposal requires an initial investment of $100m at Time 0 years, and will then pay out annual amounts of $10m, $20m, $30m, $40m, $50m and $60m at Times 1 to 6 years ~~hence~~ respectively.		For example a proposal requires an initial investment of $100m at Time 0 years, and will then pay out annual amounts of $10m, $20m, $30m, $40m, $50m and $60m at future Times 1 to 6 years respectively.

imported>Doug Williamson: Spacing.

2014-07-29T20:16:13Z

Spacing.

← Older revision		Revision as of 20:16, 29 July 2014
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	This is the time when the initial investment has been fully recovered.		This is the time when the initial investment has been fully recovered.


	For example a proposal requires an initial investment of $100m at Time 0 years, and will then pay out annual amounts of $10m, $20m, $30m, $40m, $50m and $60m at Times 1 to 6 years hence respectively.		For example a proposal requires an initial investment of $100m at Time 0 years, and will then pay out annual amounts of $10m, $20m, $30m, $40m, $50m and $60m at Times 1 to 6 years hence respectively.


	The cumulative net cash flow and payback period are calculated as follows:		The cumulative net cash flow and payback period are calculated as follows:
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	Time 4: $(40)m + $40m = $0.		Time 4: $(40)m + $40m = $0.


	The initial investment has paid back after 4 years, so the payback period is 4 years.		The initial investment has paid back after 4 years, so the payback period is 4 years.
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	This is, of course, very simplistic, and it may lead to suboptimal decisions.		This is, of course, very simplistic, and it may lead to suboptimal decisions.


	A slightly more sophisticated version of payback analysis is Discounted payback.		A slightly more sophisticated version of payback analysis is Discounted payback.

imported>Doug Williamson: Spacing 21/8/13

2013-08-21T14:00:34Z

Spacing 21/8/13

← Older revision		Revision as of 14:00, 21 August 2013
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	Payback analysis is a method of investment appraisal in which the cumulative net total of investment (one or more outflows - negative amounts) and return (inflows - positive amounts) is projected in order to determine when that net total is zero.		Payback analysis is a method of investment appraisal in which the cumulative net total of investment (one or more outflows - negative amounts) and return (inflows - positive amounts) is projected in order to determine when that net total is zero.

	This is the time when the initial investment has been fully recovered.		This is the time when the initial investment has been fully recovered.

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	The cumulative net cash flow and payback period are calculated as follows:		The cumulative net cash flow and payback period are calculated as follows:

	Time 0: $(100)m.		Time 0: $(100)m.

	Time 1: $(100)m + $10m = $(90)m.		Time 1: $(100)m + $10m = $(90)m.

	Time 2: $(90)m + $20m = $(70)m.		Time 2: $(90)m + $20m = $(70)m.

	Time 3: $(70)m + $30m = $(40)m.		Time 3: $(70)m + $30m = $(40)m.

	Time 4: $(40)m + $40m = $0.		Time 4: $(40)m + $40m = $0.

	The initial investment has paid back after 4 years, so the payback period is 4 years.		The initial investment has paid back after 4 years, so the payback period is 4 years.

	Normally there is no attempt to adjust for money received in different time periods. The underlying assumption is that the sooner you can 'get your money back' the better the project. This is, of course, very simplistic, and it may lead to suboptimal decisions.		Normally there is no attempt to adjust for money received in different time periods.

			The underlying assumption is that the sooner you can 'get your money back' the better the project.

			This is, of course, very simplistic, and it may lead to suboptimal decisions.

	A slightly more sophisticated version of payback analysis is Discounted payback.		A slightly more sophisticated version of payback analysis is Discounted payback.


	== See also ==		== See also ==
	* [[Discounted payback]]		* [[Discounted payback]]
	* [[Investment appraisal]]		* [[Investment appraisal]]

imported>Administrator: CSV import

2012-10-23T14:20:16Z

CSV import

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Payback analysis is a method of investment appraisal in which the cumulative net total of investment (one or more outflows - negative amounts) and return (inflows - positive amounts) is projected in order to determine when that net total is zero.
This is the time when the initial investment has been fully recovered.

For example a proposal requires an initial investment of $100m at Time 0 years, and will then pay out annual amounts of $10m, $20m, $30m, $40m, $50m and $60m at Times 1 to 6 years hence respectively.

The cumulative net cash flow and payback period are calculated as follows:
Time 0: $(100)m.
Time 1: $(100)m + $10m = $(90)m.
Time 2: $(90)m + $20m = $(70)m.
Time 3: $(70)m + $30m = $(40)m.
Time 4: $(40)m + $40m = $0.

The initial investment has paid back after 4 years, so the payback period is 4 years.

Normally there is no attempt to adjust for money received in different time periods. The underlying assumption is that the sooner you can 'get your money back' the better the project. This is, of course, very simplistic, and it may lead to suboptimal decisions.

A slightly more sophisticated version of payback analysis is Discounted payback.

== See also ==
* [[Discounted payback]]
* [[Investment appraisal]]