Payback (finance)

See also: Payback

In finance, the Payback , or “time of recovery”, represents the time necessary so that the Flux of estimated treasury released by a Investissement make profitable the initial capital cost.

It perhaps calculated:

is “simple”, without flows being corrected to take account of the Valeur time of the money;
is, in a more exact way, in bringing up to date flows of treasury. One speaks then about “updated payback”.

It is interested in the future of the company, unlike more static PER.

For example, if a project asks for an investment of 100 and releases from the annual Cash-flow of 20, its time of recovery is 5 years. This indicator is however imperfect, it does not make it possible for example to apprehend the later problems (Costs of repairing of the site, reprocessing of power stations, etc).

See too

For certain instruments of Interest rate like a Obligation atrate fixes, a concept very close to the updated payback is the Duration.

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