Payback period Formula = Total initial capital investment /Expected annual after-tax cash inflow. syedkollol says: July 13, 2017 at 1:32 am Please feel free to make correction. Since Project B has a shorter Payback Period as compared to Project A, Project B would be better. The payback period of the present value of a project’s cash flows. Discounted Payback Period Formula. The sunk cost is the money that has already been spent and is not liable to be recovered. Get instant live expert help on I need help with payback period formula excel “My Excelchat expert helped me in less than 20 minutes, saving me what would have been 5 hours of work!” Post your problem and you’ll get expert help in seconds. The key measure is: Key Concept: The dynamic payback period is the period after which the capital invested has been recovered by the discounted net cash inflows from the project. Let us see an example of how to calculate the payback period when cash flows are uniform over using the full life of the asset. More Excel Functions and Tips -- … The dynamic payback period method (DPP) combines the basic approach of the static payback period method (see Section 2.4) with the discounting cash flow used in the NPV model. If you were to include year 0 then it would be 3.17 years. 4 thoughts on “ Payback Period Function for Excel ” KiwiProgrammer says: July 13, 2017 at 1:27 am this is wrong!!! The equation for Payback Period depends whether the cash inflows are the same or uneven. 4,00,000. Description of the method. Tim says: February 20, 2018 at 10:03 am To get to this value, modify the formula in cell B7 to =COUNTIF(B5:E5,"<"&B1)+1 Hope this helps. = 6 Years. Discounted Payback Period = Year Before the Discounted Payback Period Occurs + (Cumulative Cash Flow in Year Before Recovery / Discounted Cash Flow in Year After Recovery) From a capital budgeting perspective, this method is a … Payback Period=$1000 ÷ $250=4.0 Years. The formula will look up the value 0 in the range $B$6:$U$6 and returns the result (in this case the year) which is less than and closest to 0. e. Reply. If they are the same (even) then the formula is as follows; Payback Period=Initial Investment ÷ Annual Cash InFlows. Like Like. Regards. Thus for Proposal B, Payback Period = Full Years Until Recovery + (Unrecovered Cost at the Beginning of the Last Year/Cash Flow During the Last Year) = 5 + (5,00,000/5,00,000) = 5 + 1. To calculate the period of payback, enter the lookup formula without quotes “ =LOOKUP (0,$B$6:$U$6,$B$2:$U$2)“. The payback period will be computed as 2 years & 2.07 months or 2.17 years (not including year 0). Reply. 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