Episode 129: How to Calculate the Payback Period
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The Payback Period is a simply capital budgeting tool used to help firms gauge the time required to recover their original investment. Although the payback period makes several significant assumptions, it still remains as a helpful tool to help firms better gauge various projects.
In this video we'll calculate the payback period using the payback period formula, which assumes consistent cash flows over a period of time. In our next video, we'll tackle calculating the payback period for inconsistent cash flows, which is far more realistic considering the volatility of the business environment.