DISCOUNTED PAYBACK PERIOD

The discounted payback period (DPP) method is similar to the payback period method, but the cash flows used are in present values. This solves the issue of the cost of capital, but the disadvantage of ignoring cash flows beyond the payback period still remains.

Discounted Payback = Year before full recovery + [unrecovered cost ÷ PV Cash Flow at time t]

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