Payback Period is one of the most simple technique of capital budgeting where it is used to ascertain the time it will take for the entity to recover its initial cash outflows from the cash inflows generated by investment project. It is an important determinant as no business organization would like to invest in projects with long payback time period.
Payback period is calculated with following formula:
Payback Period= Initial Investment/ Annual Cash Inflows
Secondly, it is the simple and easy applicability of the payback period which is the another reason for continued applicability of the payback period method.
In order to evaluate the usefulness of