Payback Period Calculation Modification

Calculating the breakeven point when we start making money from our initial investment.

In the attachment, I have calculated the Payback Period.

So it works out the full year Cumulative Cash Flow is negative and also partial year using the formuale specified.

Year 0 is the initial investment, but say the initiative is starting in 1 May 2019, is there a way to alter the fraction formulae to be (31/12/19 – Initiative Date) and thus factor 8 months and provide a fraction number earlier?

The logic behind this is it will improve the Payback to be slightly earlier because it is not for full 12 months?

Can this be done Excel community?

Regards

Originally Posted by AliGW

Who is Luke? Do you have this request posted on other forums? If so, I suggest you read and swiftly act upon our rules regarding cross posting.

Hi AliG

This was a typo. I was holding a small child at the time called Luke - I do not have this posted on any other forum.

Please lift any restriction.

Thanks

With regards to the Payback Period, perhaps it is not as tricky as I am making and you can let me know if my argument is flawed.

If Year starts at 01/01/19 to 31/12/19 this represents 1 full year where it is negative.

If the project starts on 1 May 2019, should we not say (31/12/19 – 01/05/19)/365 = 244 days/365 = 0.67 Year

Between Year 1 and Year 2, it becomes a positive cash flow of £32,800

I am not sure entirely how the partial is calculated if we do not know the exact date it becomes positive and combining my logic above.

I would like a formulae to combine this logic if it makes sense.

Thank you AliGW

Have a good day.