A project's payback period is the . estimated length of the capital investment project from the initial cash outflow to the end of the project length of time it takes for the project to begin to generate cash inflows length of time it takes for the project to recover its initial cost from the net cash inflows generated useful life of the capital asset purchased

Length of time it takes for the project to recover its initial cost from the net cash inflows generated

Explanation:

A Payback period like the term implies is simply how long it will take to pay back the original investment.

Going further it is how long it will take to pay back the original investment from the cash inflows that the project will generate.

For example, if a project costs $200 to initiate and each year has cash inflows of $50 dollars every year then all else being equal, the initial capital should be paid off in 4 years.

4 years in this scenario is the Payback Period.

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