Recovering the Costs of Investments 
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Payback Period 
Summary of Payback Period. Abstract 
The Payback Period (PP) is perhaps the
simplest method of looking at one or more investment projects or ideas.
The Payback Period method focuses on recovering the cost of investments.
PP represents the amount of time that it takes for a capital budgeting
project to recover its initial cost. The Payback Period Calculation is as follows: The Costs of Project / Investment PP =  Annual Cash Inflows The PP concept holds that all other things being equal, the better investment is the one with the shorter payback. Example of a Payback Period calculation:
For example, take a project costing a total of $200,000. The expected
returns of the project amount to $40,000 annually. PP would be $200,000
÷ $40,000 = 5 years.
PP certainly has the virtue of being easy to compute and easy to
understand. But that very simplicity carries weaknesses with it. There
are al least two major problems associated with the Payback Period
model: Compare with Payback Period: Net Present Value  Internal Rate of Return  Discounted Cash Flow 
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