Payback period


Also found in: Dictionary, Thesaurus, Medical, Legal, Financial, Acronyms, Wikipedia.

payback period

[′pā‚bak ‚pir·ē·əd]
(industrial engineering)
The amount of time required for achieving an amount in profits to offset the cost of a capital expenditure, such as the cost of investment in modifications in an industrial facility for the purpose of conserving energy.

Payback period

A popular nondiscounting project selection technique used when organizations require the capital investment of a project to be recovered within a specified period; the period it takes for the stream of net cash flows to equal the initial investment. Also, a term used in the evaluation of sustainable and renewable energy options, wherein greenhouse or greenhouse intensive energy savings that the technology may enable over its useful life are assessed in relation to the embodied energy required for its manufacture. For renewable energy systems, it can also refer to the period of time over which energy cost savings derived from accessing renewable energy offset the upfront capital costs of the system.
References in periodicals archive ?
The results were used to estimate the nation's energy savings as well as payback periods for building owners.
It tends to favour higher risk decisions (because future profits are insufficiently discounted for risk, and for time value), whereas use of the payback period leads to overly conservative decisions.
5% IRR result for the UHDTV, as well as the six year payback period.
However, these calculations of payback period and ROI ignore the time value of money.
The payback period is calculated only on an unlikely possibility, and this often results in an erroneous decision not to bear added risk.
From the financial values presented in Table IV, it can be seen that Van Heezik and Inter City have realized a payback period which is within the limits of the five year depreciation period that they normally use for capital investments.
Despite my preference for discounted cash flow, doesn't the heavy use of payback period by Japanese firms argue for its validity in the U.
If the equipment has an anticipated annual net cash flow of $50,000, the payback period is five years (250,000/50,000).
Energy conservation can also include upgrading chillers, motors and air conditioners, which typically have payback periods of less than three years.
Based on the approximate cost for making these changes, the payback period in the different minimum effluent mills varies between 3 and 5 years.
In order to perform a return on investment (ROI) calculation, or the payback period, it is necessary to estimate the capital equipment and installation costs.
Stroma officials say the iRing program can bring an almost immediate return on investment and for some larger mines with big tonnages, a one-month payback period.