• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL
Help

Chapter 20. Building Discount Formulas > Discounted Payback Period

Discounted Payback Period

Of course, the undiscounted payback period tells you only so much. To get a true measure of the payback, you need to apply these payback methods to the discounted cash flows. This tells you when the investment is paid back in today's dollars.

To do this, you need to set up a schedule of discounted net cash flow and cumulative cash flow for each period, and extend the periods until the cumulative discounted cash flow becomes positive. You can then use the formulas presented in the previous two sections (adjusted for the extra periods) to calculate the payback period and exact payback point (if applicable). Figure 20.12 shows the discounted payback values for the store's cash flows (columns D through F are hidden).


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint