Discounted Payback Period

Short definition

Discounted payback is the time until discounted incremental cash recovers the outlay. It adds time value to payback; it still ignores cash after the cut-off.

Detailed explanation

Each CFₜ / (1+r)ᵗ is accumulated; the period that crosses I₀ (with interpolation) is the life. Higher r lengthens the period; a “three-year payback” can become five years once discounted in a high-rate setting.

A positive-NPV project can still show discounted payback shorter than its life, because tail cash is omitted. The method is a screen, not a ranking rule.

Why it matters for the CFO

When loan tenor is short and project life is long, discounted payback asks whether cash returns before the refinancing wall.

How it is calculated

İskontolu payback = iskonto edilmiş kümülatif CF’nin I₀’ı karşıladığı süre

Same cumulative logic as payback, but cash is discounted at r. Without r it collapses to ordinary payback.

Variables in the formula

• r: discount rate

How to read it

Discounted payback inside the loan tenor strengthens the case for surviving without a refinance; it is not a profitability proof. The cut-off depends on sector and covenant timing.

Numerical example

I₀ = 10 mn TL, CF 6 and 6 mn TL, r = 25%: PV = 4.80 and 3.84; cumulative 8.64, remaining 1.36 / 3.84 ≈ 0.35 → ≈ 1.35 years versus ~1.67 undiscounted.

Definitions are educational. They are not investment, credit or tax advice.