How to Calculate a Simple Regular Payback


It is important to calculate the simple regular payback of any potential investment before deciding if it is a good idea to go ahead with it or not. Many businesses use simple regular payback calculations to determine if a new piece of equipment is a solid investment or not. This calculation helps to determine when an investor, or buyer, will see a profit from an something they are considering investing a sum of money into.

  • Divide the total cost of the investment by the projected annual cash inflow.

  • Take the average of the cash inflows, if you predict different annual inflows during the payback period.

  • Use the sum of this equation as the payback period. For example, if the total investment is $10,000 and the annual cash inflows are $2,000, the payback period is five years.

  • Take the length of the payback period and use it as a method to determine whether the investment is worthwhile or not. It may also be helpful to perform a breakeven analysis in conjunction with the simple regular payback calculation, when making a decision involving a major financial investment.

Related Searches


Promoted By Zergnet


You May Also Like

Related Searches

Check It Out

4 Credit Myths That Are Absolutely False

Is DIY in your DNA? Become part of our maker community.
Submit Your Work!