Definition How long it takes for an investment to earn back its original cost.
Example A €60k investment returning €20k a year has a payback period of 3 years.
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Why it matters It shows how quickly an investment returns its money.
Where it is used Business cases, investment approvals and project reviews.
How to calculate it Initial investment ÷ annual cash inflow
Worked example A €60k investment returning €20k a year has a payback period of 3 years.
