Money over time become cheaper, respectively, the future cash flow is calculated according to the current conditions (for example, prices for the products) must be discounted in the future. The results of calculations is better to issue in the form of a table. The discounted value of income can be obtained by dividing this value by (1 + discount rate) to the extent that the number of years for which we produce discounting.
The discount rate is dependent on many factors including inflation, and therefore for the calculation is taken to mean the approximate range of 10 to 15%. Suppose the initial investment in the project is 200 thousand. Rubles. But do not think that the project will pay for itself in 2 years. If we take into account the discount rate of 15%, the payback period will be a little longer. If the expected annual income of 100 thousand. Rub., The present value in the first year of the project is 100/1 = 15, 87 thousand. Rubles. In the second year of the project present value must be calculated as follows: 100/1, 15 ^ 2 = 75, 6 thousand. Rub., Respectively, and in the third year of the calculation will be as follows: 100/1, 15 ^ 3 = 50, 4 thousand . rub.
Now you need to figure out what year of the project will pay off. To do this, the value of the initial investment to the negative, you need to consistently add value discounted income for each year. As soon as the value becomes positive, it means that you have found the year when the project was to generate income, and therefore paid off.
In this example, the first 2 years of the end of the period for calculating the value of the negative: -200 + 87 + 75 = 6 -37, 4 th. Rub., And based on the data for 3 years - is positive: -200 + 87 + 75, 6 + 50 = 13 4 th. rubles. That is, the period before the period - 2 years.
The formula for calculating the payback period is as follows: T = period until the payback + cash flow at the time of payback / discounted cash flow in year payback. Accordingly, the calculation should look like this: T = 2 + 37, 4/50, 4 = 2, 74 years old. That is the project taking into account the reduction of time value of money must be paid back in 2 years 9 months.