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ClearTax serves 2.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.Įfiling Income Tax Returns(ITR) is made easy with ClearTax platform. Payback Period = 3 + (2,00,000 – 1,85,000) / 40,000 = 3.375 years.ĬlearTax offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. You have the unrecovered investment at the start of the fourth year, which is the initial investment (Rs 2,00,000) minus the cumulative cash flow at the end of the third year (Rs 1,85,000). You have year 3 which is the last year before the investment turns positive.
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Payback period = Years before full recovery + Unrecovered cost at the start of the year / Cash flow during the year You expect Rs 70,000 in the first year of the project, a sum of Rs 60,000 in the second year of the project, Rs 55,000 in the third year of the project, Rs 40,000 in the fourth year of the project, Rs 30,000 in the fifth year of the project and Rs 25,000 in the sixth year of the project. For example, you have invested Rs 2,00,000 in a project. You may calculate the payback period for uneven cash flows.

Payback Period = Initial investment / Cash flow per yearįor example, you have invested Rs 1,00,000 with an annual payback of Rs 20,000. To calculate the payback period you can use the mathematical formula: The payback period calculator shows you the time taken to recover the cost of the investment. How does Payback Period Calculators work? You may use the payback period concept along with other metrics to evaluate the return on investment. However, it does not account for the time value of money. The payback period is an easy method to calculate the return on investment. For example, if it takes 10 years for you to recover the cost of the investment, then the payback period is 10 years. The payback period in capital budgeting gives the number of years it takes for you to recover the cost of the investment. You may select a project or an investment that has a short payback period. If your investment has a short payback period, you may quickly recover the cost of the investment. An investment may have a short or a long payback period. The payback period helps you to evaluate the associated risks of an investment. The payback period shows you the time taken to recover the cost of the project. It would help if you retrieved the investment costs of a project as soon as possible to make a profit. In simple terms, it is time an investment takes to reach the break-even point. The payback period is the time you need to recover the cost of your investment.
