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Significance and Use
The payback method is part of a family of economic evaluation methods that provide measures of economic performance of an investment. Included in this family of evaluation methods are life-cycle costing, benefit-to-cost and savings-to-investment ratios, net benefits, and internal rates of return.
The payback method accounts for all monetary values associated with an investment up to the time at which cumulative net benefits, discounted to present value, just pay off initial investment costs.
Use the method to find if a project recovers its investment cost and other accrued costs within its service life or within a specified maximum acceptable payback period (MAPP) less than its service life. It is important to note that the decision to use the payback method should be made with care. (See Section 11 on Limitations.)
1.1 This practice provides a recommended procedure for calculating and applying the payback method in evaluating building designs and building systems.
2. Referenced Documents (purchase separately) The documents listed below are referenced within the subject standard but are not provided as part of the standard.
E631 Terminology of Building Constructions
E833 Terminology of Building Economics
E917 Practice for Measuring Life-Cycle Costs of Buildings and Building Systems
E964 Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems
E1057 Practice for Measuring Internal Rate of Return and Adjusted Internal Rate of Return for Investments in Buildings and Building Systems
E1074 Practice for Measuring Net Benefits and Net Savings for Investments in Buildings and Building Systems
E1185 Guide for Selecting Economic Methods for Evaluating Investments in Buildings and Building Systems
ICS Number Code 03.060 (Finances. Banking. Monetary systems. Insurance); 91.010.99 (Other aspects)
UNSPSC Code 81120000(Economics); 30000000(Structures and Building and Construction and Manufacturing Components and Supplies)