payback method


Also found in: Financial, Encyclopedia.

payback method

a method of assessing the potential profitability of two or more competing strategies; based on the assessment of the period of time required before the financial returns from the strategy recoup the original investment.
References in periodicals archive ?
According to the payback method, India is obliged to either consume the gas in Iran or export it so that we can pay the investment return, Zanganeh noted.
While the former are students mastering concepts like shapes and letters, iPads and algebra, and the payback method, respectively, working professionals are already adept at learning from their environment, network, and stakeholders, to name a few, and are automatically applying this knowledge to their career or personal lives.
Early chapters cover financial decision making concepts, while later chapters are devoted to four methods: the payback method, the net present value method, the internal rate of return, and the profitability index method.
In the age of high computing power and easy-to-use spreadsheet software programs, a life cycle cost analysis accounting for these factors is recommended in lieu of a Simple Payback method.
The seminars will also examine allocating company resources according to a prioritised list of projects as well as identifying project evaluation and analysis techniques including the discounted payback method, internal rate of return, net present value and profitability index.
Most engineers are familiar with simple payback method (projected savings divided by expenditure), but this is a crude measure--it underestimates the energy savings over the lifetime of the project, does not often sell the overall benefits effectively.
The DCF-based approaches are contrasted with the payback method and the accounting rate of return as methodologically deficient albeit still widely used decision rules.
8) It has precisely the strengths and shortcomings of the payback method albeit embellished as a percent per year rate of return concept.
However, many firms still used the payback method as a backup or secondary approach.
The payback method does this very explicitly by requiring very short payback periods, typically two to three years.