- payback period
- 1. A period of time over which the costs of an investment are recouped by cash flows the investment generates. To take a simple example, a $12,500 investment that is expected to result in annual, net cash inflows of $5,000 has a payback period of 2.5 years. In practice, payback calculations are complicated by uncertainty over cash flows and the effects of the *time value of money. The latter issue is usually addressed by *discounting future cash flows to their *present values. 2. A period of time over which a loan should be reimbursed.
Auditor's dictionary. 2014.
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