Payback Method

1. The payback method is a capital budgeting method that calculates the amount of time to recover the initial investment for an investment or project (i.e., the payback period). The shorter the payback period, the better. The normal payback method uses nondiscounted after-tax cash flows. See also discounted payback method. The period of time necessary to recover the cash cost of an investment from the cash inflows attributable to the investment.