HP-12C Project Payback

HP-12C simple payback (years)

The simple payback period tells you how long it takes for accumulated cash flows to give back the initial investment: PB = ano antes pleno + |FC acumulado| / FC do ano. There is no discounting involved, so it is quick to work out, but that also means it skips the time value of money and anything that arrives after payback. Most people use it as a fast go/no-go check before digging deeper.

Plenty of companies set a ceiling on payback, say 3-5 years. If you want sharper numbers, look at discounted payback (DPB), NPV or IRR instead. The CFA knocks simple payback for ignoring TVM, yet it still gets used across oil&gas, mining and manufacturing whenever the call is really about liquidity.

Applications

Quick screening, energy efficiency projects, ROI marketing, deciding when to replace equipment, and sizing up a startup's runway.

FAQ

Why is simple payback flawed? It overlooks the time value of money and turns a blind eye to any flow that lands after payback.

What's an acceptable payback? Depends on the field. Tech tends to want 1-3y, infrastructure runs 5-15y, and mining can stretch to 7-20y.

When use simple payback? When liquidity is on the line, the project is small, or you just need a first pass before running NPV.