Which investment appraisal technique estimates the time required to recoup the initial cash outlay?

Which investment appraisal technique estimates the time required to recoup the initial cash outlay?

• A. Net Present Value
• B. Payback Period
• C. Qualitative Investment Appraisal
• D. Assets

Answer: (B)

Payback period focuses on how long it takes for the project to recover the money invested upfront. It works by adding up the cash inflows each period until their total equals the initial outlay. The moment that cumulative amount is reached is the payback time, which gives a simple view of liquidity and risk—how quickly the investment can be repaid. It’s a straightforward metric, but it ignores any cash flows that occur after payback and, in its basic form, doesn’t discount future money. That’s why it’s different from net present value, which measures overall profitability with the time value of money, and from qualitative appraisal, which looks at non-financial factors. The option listed as an investment term isn’t a method for evaluating investments.

Payback period focuses on how long it takes for the project to recover the money invested upfront. It works by adding up the cash inflows each period until their total equals the initial outlay. The moment that cumulative amount is reached is the payback time, which gives a simple view of liquidity and risk—how quickly the investment can be repaid. It’s a straightforward metric, but it ignores any cash flows that occur after payback and, in its basic form, doesn’t discount future money. That’s why it’s different from net present value, which measures overall profitability with the time value of money, and from qualitative appraisal, which looks at non-financial factors. The option listed as an investment term isn’t a method for evaluating investments.