Payback period is commonly used to evaluate proposed investments. The payback period is the amount
of time required for the firm to recover its initial investment in a project, as calculated from cash inflows.
The payback period can be found by dividing the initial investment by the annual cash inflow. Although
popular, the payback period is generally viewed as an unsophisticated capital budgeting technique,
because it does not explicitly consider the time value ofmoney. To calculate the payback period, the data
can be seen on table 3.3 below.