All methods presented thus far reflect the profitability of a proposed alternative for a study period of N. The payback method, which is often called the simple payout method, mainly indicates a project’s liquidity rather than its profitability. Historically, the payback method has been used as a measure of a project’s riskiness, since liquidity deals with how fast an investment can be recovered. A low valued payback period is considered desirable. Quite simply, the payback method calculates the number of years required for cash inflows to just equal cash outflows. Hence, the simple payback period is the smallest value of θ(θ ≤N) for which this relationship is satisfied under our normal EOY cash-flow convention. For a project where all capital investment occurs at time0, we have