Types
of Payback period
Payback
period may be classified into simple payback period, discounted payback period,
even payback period and UN even payback period.
1. Simple payback period
Simple
payback period used un discounted cash flows. The main disadvantages of this
payback period is ignoring of the time value of money.
2. Discounted Payback Period
Discounted
payback period is calculated by using discounted cash flows. The basic
principles of calculating the payback remains same. However, discounted cash
flow is used instead of simple cash flows.
3. Even payback period
Payback
period which use the even (equal) cash flows are regarded as even payback
period or payback period calculated from even cash flow. Even payback period is
relatively easy to calculate than un even payback period.
4. Un even payback period
Payback
period is calculated by using un even (unequal cash flow) is known as un even
payback period. UN even payback period
is relatively difficult to calculate than even payback period.
