The payback period stated time-frame during which the initial amount of investment should be recovered. It is expressed in the year form
The formula to compute the payback period is shown below:
Payback period = Initial investment ÷ Net cash flow
where,
The net cash flow = annual net operating income + depreciation expenses
The payback period of the project decreases when the accumulated starting year cash flows increases that results the movement of the cash inflows earlier in time
