Simple Payback
An investment appraisal method that calculates how long it takes for the cumulative cash inflows from an investment to r...
Formula
Payback Period = Initial Investment ÷ Annual Net Cash Inflow (or cumulative method)
Real World
A small bakery spends £24,000 on a new industrial oven generating £8,000 net cash inflow per year — its payback period is exactly 3 years, helping the owner judge whether that wait is acceptable.
Exam Focus
Show cumulative cash flow working in a table; examiners award method marks even if your final answer is wrong.
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