Payback period

Definition:

In project evaluation and capital budgeting, the payback period estimates the time required to recover the principal amount of an investment. Because the payback period method ignores any benefits that occur after the investment is repaid and the time value of money, other methods of investment analysis are often preferred. See: Internal rate of return (IRR), Discounted cash flow (DCF), and Net present value (NPV)

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Statistical inference

A statistical method of drawing conclusions on unknown properties of a population based on a random sampling of data from that population.

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