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Payback (PB)

  • Rosalie T. Ruegg
  • Harold E. Marshall

Abstract

The PB method measures how long it takes to recover investment costs. Benefits or savings, net of future costs, are accumulated year by year until the total is sufficient to offset investment costs. If, in computing the payback period, you ignore the time value of money (i.e., assume a zero discount rate), the method is called “simple payback (SPB).” If you take into account the time value of money (i.e., assume a positive discount rate), the method is called “discounted payback (DPB).” DPB is a more accurate measure of payback than SPB.

Keywords

Discount Rate Cash Flow Investment Cost Payback Period Project Life 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

  1. Clark, John J., Thomas J. Hindelang, and Rober E. Pritchard. 1984. Capital Budgeting: Planning and Control of Capital Expenditures. Englewood Cliffs, New Jersey: Prentice-Hall, Inc.Google Scholar
  2. Marshall, Harold E. 1984. Recommended Practice for Measuring Simple and Discounted Payback for Investments in Buildings and Building Systems. NBSIR 84–2850. Gaithersburg, MD: National Bureau of Standards.Google Scholar

Copyright information

© Springer Science+Business Media New York 1990

Authors and Affiliations

  • Rosalie T. Ruegg
  • Harold E. Marshall

There are no affiliations available

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