WALL ST.

TRAINING
B
1

Payback Period Analysis

2
3

Undiscounted Payback Period Analysis

Project

Year 1

Undiscounted Net Cash Flow

Cumulative Net Cash Flow
Positive Cash Flow?

Undiscounted Payback Period

10

Partial Year Payback Period

3.25

Actual Number of Years

11

Partial Year Payback Period (One Cell)

3.25

Using arrays and index

6
7

$ (200,000)

$ 40,000
(160,000)
First Year Positive

12
13
14
15
16

Discounted Payback Period Analysis

Discount Rate

Project

17

Year 1

18
19

Undiscounted Net Cash Flow

20

Cumulative Net Cash Flow

21

Positive Cash Flow?

22

Undiscounted Payback Period

23

Partial Year Payback Period

3.84

Actual Number of Years

24

Partial Year Payback Period (One Cell)

3.84

Using arrays and index

320393034.xlsxPaybackPeriod

$ (200,000)

$ 36,364
(163,636)
-

First Year Positive

Hamilton Lin, CFA, www.wallst-training.com

WALL ST. TRAINING

G

1
2
3
4

Projected

Year 2

Year 3

Year 4

Year 5

$ 60,000
(100,000)
-

$ 75,000
(25,000)
-

$ 100,000
75,000
1.0

$ 125,000
200,000
1.0

Year 4

Year 5

7
8
9
10
11
12
13
14
15
16
17

10.0%
Projected

18

Year 2

Year 3

19

$ 49,587

$ 56,349

$ 68,301

$ 77,615

20

(114,050)

(57,701)

10,600

88,216

1.0

1.0

21

22
23
24

320393034.xlsxPaybackPeriod

Hamilton Lin, CFA, www.wallst-training.com

WALL ST. TRAINING

E9:

Wall St. Training

The Payback Period is the length of time between an initial investment and the recovery of the investment from its annual cash
flow.

E22:

Wall St. Training

Discounted payback period should be greater than undiscounted payback period since the value of future cash flows are worth
less.

320393034.xlsxComments

Hamilton Lin, CFA, www.wallst-training.com