Skip to main content
💵Capital Budgeting Formulas

Payback Period

Initial Investment ÷ Annual Cash Inflow = Payback Period (years)

What It Means

How long to recover your investment.

Example

Initial Investment:$100,000
Annual Cash Inflow:$25,000

$100,000 ÷ $25,000

Payback Period = 4 years

Related Formulas

Accounting Rate of Return (ARR)

Average Annual Net Income ÷ Average Investment × 100 = ARR %

Net Present Value (NPV)

Σ (Cash Flow ÷ (1 + r)^n) - Initial Investment = NPV

Present Value Factor

1 ÷ (1 + r)^n

Want all 70+ formulas in one place?

← Back to Full Cheatsheet