Payback Period
Payback period is the time required to recover the initial investment through net cash flows, measuring liquidity risk and capital recovery speed.
| Calculation Method | Approach |
| Simple payback | Initial investment / Annual net cash flow |
| Discounted payback | Account for time value of money |
| Cumulative cash flow | Track year-by-year recovery |
| Break-even timing | When cumulative cash = initial investment |
| Example Calculation | Years |
| Initial investment | AED 400,000 (down payment plus fees) |
| Annual net cash flow | AED 25,000 |
| Simple payback period | 16 years |
| Target payback | Under 10 to 12 years preferred |
| Limitation | Ignores cash flows beyond payback point |
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