The payback method is part of a family of economic evaluation methods that provide measures of economic performance of an investment. Included in this family of evaluation methods are life-cycle costing, benefit-to-cost and savings-to-investment ratios, net benefits, and internal rates of return.
The payback method accounts for all monetary values associated with an investment up to the time at which cumulative net benefits, discounted to present value, just pay off initial investment costs.
Use the method to find if a project recovers its investment cost and other accrued costs within its service life or within a specified maximum acceptable payback period (MAPP) less than its service life. It is important to note that the decision to use the payback method should be made with care. (See Section 11 on Limitations.)
1.1 This practice provides a recommended procedure for calculating and applying the payback method in evaluating building designs and building systems.
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