The discounted payback period is a capital budgeting procedure used to determine the profitability of a project. A discounted payback period gives the number of years it takes to break even from undertaking the initial expenditure, by discounting future cash flows and recognizing the time value of money.

## What is the discounted payback period of this project?

The **discounted payback period** (DPB) is the amount of time that it takes (in years) for the initial cost of a **project** to equal to **discounted** value of expected cash flows, or the time it takes to break even from an investment. It is the **period** in which the cumulative net present value of a **project** equals zero.

## Is payback period a DCF?

Discounted payback period is a variation of payback period which **uses discounted cash flows while calculating the time an investment takes to pay back its initial cash outflow**. One of the major disadvantages of simple payback period is that it ignores the time value of money.

## What is simple payback period?

The payback period refers to the amount of time it takes to recover the cost of an investment. Simply put, the payback period is **the length of time an investment reaches a break-even point**.

## How do you calculate payback?

To determine how to calculate payback period in practice, you **simply divide the initial cash outlay of a project by the amount of net cash inflow that the project generates each year**. For the purposes of calculating the payback period formula, you can assume that the net cash inflow is the same each year.

## What is a good payback period?

As much as I dislike general rules, most small businesses sell between 2-3 times SDE and most medium businesses sell between **4-6 times EBITDA**. This does not mean that the respective payback period is 2-3 and 4-6 years, respectively.

## How do you calculate payback period for a project?

**There are two ways to calculate the payback period, which are:**

- Averaging method. Divide the annualized expected cash inflows into the expected initial expenditure for the asset. …
- Subtraction method. Subtract each individual annual cash inflow from the initial cash outflow, until the payback period has been achieved.

## What is MIRR formula?

The MIRR formula in Excel is as follows: **=MIRR**(cash flows, financing rate, reinvestment rate) Where: Cash Flows – Individual cash flows from each period in the series. Financing Rate – Cost of borrowing or interest expense in the event of negative cash flows.