A graphical approach to discounted payback

Corrstructiorr planners and building owners use payback frequently as an index of economic pe$ormance. Discounted payback, which considers the time value of money in measuring the time to project payoff, is a more accurate index ofproject cost effectiveness than simple payback. But being more dijficult to calculate, it is used less often than simple payback. This paper provides a unique set of graphs that helps decision makers, find discounted payback quickly and easily without complex calculations. Appropriate applications of simple and discounted payback are described. Examples of economic efficiency losses from using payback instead of more appropriate evaluation measures and from using simple instead of discounted payback are presented.