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Payback Period Formula4/15/2021
This is important because by taking the prior year, we can get the integer.The purpose of this part is to find out the proportion of how much is yet to be recovered.
The firm expects to generate 70,000 in the first year, 60,000 in the second year, and 60,000 in the third year. Let us take the 10 discount rate in the above example and calculate the discounted payback period. So, this means as the discount rate increases, the difference in payback periods of a discounted pay period and simple payback period increases. Let us take some more examples to understand the concept better. In the market, there are two models available in the market (Model A Model B) at the cost of 5,00,000 each. The salvage value of an old machine is 1,00,000.The utilities of existing machinery that can be used are company purchases model A, and additional utilities to be bought are only 1,00,000. The cash flows expected are as follows, and the discount rate is 15. You need to provide the two inputs of Cumulative cash flow in a year before recovery and Discounted cash flow in a year after recovery. You can easily calculate the period in the template provided. Payback Period Formula How To Calculate AHere we learn how to calculate a discounted period using its formula along with practical examples. Here we also provide you with a discounted payback period calculator with a downloadable excel template. CFA And Chartered Financial Analyst Are Registered Trademarks Owned By CFA Institute. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy.
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