Payback Period  ECR
anniebabe
Registered Posts: 595 Epic contributor 🐘
Hi Guys
Can anyone explain how to calculate a part year on the payback period, looking at it in the Osborne book and somehow its not sinking in at the moment.
Many thanks
Can anyone explain how to calculate a part year on the payback period, looking at it in the Osborne book and somehow its not sinking in at the moment.
Many thanks
0
Comments

do you just divide the cash flow by 12 months ? and the remaining figure is the money that is left ? not sure why this has confused me.0

Hi Guys
Can anyone explain how to calculate a part year on the payback period, looking at it in the Osborne book and somehow its not sinking in at the moment.
Many thanks
yeat 0 Investment  150,000
year 1 Net cash inflow + 30,000 120,000 (investment recovered 30K)
year 2 Net cash inflow + 40,000 80,000 (investment recovered 70K)
year 3 Net cash inflow + 50,000 30,000 (investment recovered 120K)
Year 4 Net cash inflow + 60,000
from the above we can see that we have recovered £120,000 in 3 years
We now need to recover 30K from year 4
Assuming that the net cash inflow is constant throughout the year then it will take 6 months in year 4
calclulations  (30,000 / 60,000 x 12 months)
therefore payback = 3 years 6 months0 
Thanks SDV
Yes I understood the first part  it was the year 4 that confused me.
Still dont get it properly.
Hope it will click soon.0 
In Year three , how much outflow left to recover : £30,000
In Year four, how much incoming :£60,000
Assuming inflow is spread evenly, you do not need a whole year 4 to get your outflow, you just need half of year 4, hence this is how you do the calculation regarding year 4 :
£30,000/£60,000 X12months = 6 months
Hope it will click now0 
Thanks, everythings a bit of a fog at the moment, will get there  hopefully for the exam in 4 wks.0
Categories
 All Categories
 1.2K Books to buy and sell
 2.3K General discussion
 12.5K For AAT students
 318 NEW! Qualifications 2022
 161 General Qualifications 2022 discussion
 11 AAT Level 2 Certificate in Accounting
 56 AAT Level 3 Diploma in Accounting
 87 AAT Level 4 Diploma in Professional Accounting
 8.8K For accounting professionals
 23 coronavirus (Covid19)
 272 VAT
 92 Software
 273 Tax
 135 Bookkeeping
 7.2K General accounting discussion
 200 AAT member discussion
 3.8K For everyone
 38 AAT news and announcements
 345 Feedback for AAT
 2.8K Chat and offtopic discussion
 582 Job postings
 16 Who can benefit from AAT?
 36 Where can AAT take me?
 42 Getting started with AAT
 26 Finding an AAT training provider
 48 Distance learning and other ways to study AAT
 25 Apprenticeships
 66 AAT membership