Payback period – PB
Payback period - PB, months
The payback period of the project is time (in the program it is measured in months), when the amount of revenues generated by the project will cover the investment amount:
CFn forecast – net cash flow (net receipts) in the n period,
In – initial investment in the n period.
Payback period should not exceed the duration of the project
Sometimes there are situations when it is difficult to avoid incorrect calculations, and it is impossible to perform the calculation of integral indicators within the period of calculating one project in the usual way. For example, when there are situations with several payback periods, respectively - several NPVs, and so on.
How in this case to determine the payback period and other indicators? Financial mathematics does not give an unambiguous answer to these questions. Provided that the last period in the line "Calculation of the payback period" has a positive value, the program will adjust the calculation of the payback period in this case as follows:
PB = N – N+ + 1,
PB payback period;
N – total periods;
N+ – all periods with a positive value.
Of course, in most cases you have to deal with usual calculations, nevertheless, the value of the methodology laid down in the program is precisely that it "find" the correct solutions for complex and non-standard calculations.