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Payback period

The period of time taken for the return on investing in a new product to cover the sum of the investment into the product and start to generate profits.

The payback period is deemed a vehicle of analysis with notable limitations and capabilities however. The Payback period does not take into consideration the time value of money, jeopardy, funding or other key business components like opportunity cost. Although the time value of money can be adjusted by considering a distorted average cost of capital discount, it is commonly recognised that this method for investment findings should not be used exclusively.

See also:
Boston Matrix
Cost–benefit analysis
Cost-effectiveness league table (healthcare economics)

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