Definition for : Payback period

The payback period is the time necessary to recover the initial outlay on an Investment. Where annual Cash flows are identical, the payback period is equal to: Investment/annual Cash flow. Payback period criterion emphasises the liquidity of an Investment, but not its Value. See also Discounted payback period. Payback period is also called Payback ratio.

(See Chapter 29 The cost of capital of the Vernimmen)

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