Think & Done

Finance.ThinkAndDone.com provides you an online tool to perform payback period calculation from series of future cash flows. Payback period method is the oldest of capital budgeting methods employed by organizations to find the time period required to recover the costs incurred in undertaking a project. Even though it sounds simple to explain the payback period yet as there is no mathematical formula to find payback period thus it is not so easy to find payback period when series of cash flows are in uneven amounts. An organization sets aside a target time period in which it expects to breakeven on the investment; a projoect is selected if the actual payback period calculated from future cash flows is less than the target payback period.

Payback Period Excel Function

Although this page is dedicated to an online tool that performs payback period calculation, however it may be that you would like to find payback period using popular Excel spreadsheet program. Excel provides roughly 50 financial functions yet most of these have limited capability as is evident from the assumption that interest rates are compounded discretely as in per period compounding of interest. Excel does not provide any functions for capital budgeting methods such as payback period, discounted payback period, net future value, profitability index and others. Thus one has to resort to 3rd party Excel addin solutions such as TADXL Excel add-in for finance that has over 40 financial functions that fixes the issues with interest compounding by allowing you to chose from discrete or continuous compounding of interest. But the main advantage of using TADXL add-in is the provision of new financial functions that are not there in Excel. You will find functions such as tadPP for finding payback period that are so easy to use.

The tadPP function permits you to provide the series of cash flows as a range of cells and that's it. tadPP function shows results for the payback period required to recoup the initial investment from the series of cash flows you provided. For example, say you have the cash flows of -1000 350 350 350 350 in cells first row. To find payback period with tadPP function all you would require is type in tadPP(A1:A5) in cell A2. And this will result in tadPP function displaying the payback period in cell A2. See, it doesn't get any easier than this for find payback period in Excel. The following video tutorials shows you what steps are required of using tadPP function in Excel

tadPP Video Tutorial

The following video is a step by step guide that shows or demonstrates to you how you can use tadPP Excel funtions to calculate payback period when you key in the series of cash flows from an investment. Once you have watched the video, you may like to find more details about TADXL Excel add-in for finance that contains tadPP and other financial functions that you can exploit in Excel