A capital investment project's payback period is the length of time it takes for the project to recover its initial cost from the net cash inflows generated.
When a project is embarked on, it is assumed that it will generate certain cash inflows and that these inflows will be able to pay the company back for the costs that the company incurred when it initiated the project.
These cash inflows will come in at different times instead of all at once so the company will need to know when the net sum of these payments will pay back the entire cost and this is the purpose of the payback period.
If the company decides that the time it would take the project to pay back the cost(payback period) is acceptable, they will embark on the project.
More information on payback periods can be found at:
