Deterding, S., Dixon, D., Khaled, R. and Nacke, L. (2011a) âFrom Game Design Elements to Gamefulness: Defining âGamificationââ, Envisioning Future Media Environments - Conference proceedings, MindTrekâ11, Tampere, pp. 9â15.
The payback method is a simple way to evaluate the number of years or months it takes to return the initial investment. The payback period is usually expressed in years. Start by calculating net cash flow for each year: net cash flow year one = cash inflow year one - cash outflow year one.
The calculation for discounted payback period using this example is the following. Imagine that a company wants to invest in a project costing $10,000 and expects to generate cash flows of $5,000 in year 1, $4,000 in year 2, and $3,000 in year 3. The weighted average cost of capital is 10%.