Page 13 - PowerPoint Presentation

CAPITAL INVESTMENT APPRAISAL

Payback Period

Payback period =

• Number of years it takes to recover the original investment

cost.

Example:

In order to undertake a project we need to buy a

machine at a cost of R10 000, which will last the 5 year

life of the project and will then be sold for R1 000 scrap.

It can be used to generate the following net receipts from

sales of the product: Year 1 = R3 000, Year 2 = R4 000,

Year 3 = R5 000, Year 4 = R2 000, Year 5 = R1 000

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