The Payback Period

Description

The Payback Period calculates how long it takes for an organization to get
back the funds it originally invested in a project. It is basically used to
determine the time needed for an investment to break-even.

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Payback Period

Year Expected Cash Flow ($m) Cumulative Cash Flow ($m)

0 ($150) ($150)
1 $70 ($80)
2 $55 ($25)
3 $40 $15
4 $25 $40
5 $10 $50

Cash Flow in Payback

Completion Year 40
Cumulative cash flow preceding
break-even point 25

Payback period (years) 2.63

 Payback Period: Expected vs. Cum
=SUM($C$6:C6) $100
=SUM($C$6:C7) $70
$55
=SUM($C$6:C8) $40
$50
=SUM($C$6:C9) $25
$15
=SUM($C$6:C10)
$0
=SUM($C$6:C11)
($25)
($50)

=INDEX(C7:C11,MATCH(0,D7:D11,1)+1) ($80)
($100)

=ABS(INDEX(D7:D11,MATCH(0,D7:D11,1)))
($150)
($150)($150)

=COUNTIFS(D7:D11,"<"&0)+C15/C14 ($200)
eriod: Expected vs. Cumulative Cash Flows

$55 $50
$40 $40
$25
$15 $10

Expected Cash Flow ($m)

($25) Cumulative Cash Flow ($m)