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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.
To begin the calculation of the Payback Period for project A let's add an additional column to the above table which represents the Net Cash Flow (NCF) for the project in each year.