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Project Management & Agile · Foundational

Payback Period

The length of time required to recover the initial investment from net cash inflows.

Definition

Shorter is better. It ignores the time value of money (unless discounted) and cash flows after payback.

Example

$200k investment returning $50k per year: 4-year payback.

Exam tip

Pick the shortest payback when that is the selection criterion.

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