What is a payback period?
submitted by alison

reese

The payback period is how long it takes for an investment to pay for itself. So, if you put in $10,000 and get back $2,000 each year, the payback period would be 5 years.

You can use the payback period to decide whether or not you want to get involved in a certain investment. If you know the payback period is 10 years, but you foresee some costs to upgrade your equipment before then, you may want to choose something with a shorter period, if that's an option.

benson

It's the time you need to wait until your investment is profitable enough to cover what you put in. In other words, it's how long it takes to break even. That doesn't mean you pull all the money out, as it could still be growing for a while.