Investment Annual Net Cash Flow From Asset It can get a bit tricky when annual net cash flow is expected to vary from year to year. Which means the payback period is 2042 years or 2 years and 15 days 04236515 days. The payback period is calculated by dividing the amount of the investment by the annual cash flow.
Divide the cash outlay which is assumed to occur entirely at the beginning of the project by the amount of net cash inflow generated by the project per year which is assumed to be the same in every year.
Use the formula IF. Discounted Cash inflow Actual Cash inflow 1i n. The shorter the discount period the sooner a project generates cash flows to cover the initial cost. Payback Period formula Full Years Until Recovery Unrecovered Cost at the beginning of the Last YearCash Flow During the Last Year Capital Budgeting is one of the important responsibilities of a finance manager of a company.