understanding financial jargon
The payback period is a measure of how long it takes for a project or investment to repay any initial outlay. For example, if a company launches a £50,000 project to bring a new product to market in one year, and it then expects to make profit on of the new product of £10,000 per year there after, the payback period is six years. This simple example assumes the initial outlay is spent at the start of the project, and does not take into account other factors such as inflation.
An alternative measure is discounted payback which reduces the cash inflow by a discount rate to reflect the 'time value' of money over the life of the project or investment. Discounted payback will lengthen the payback period.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
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