Table 1.

Economic criteria

Economic criteria	Formula
Net present value	Σ{Period net cash inflows/(1 + r)^t} − initial investment
Internal rate of return	Σ{Period net cash inflows/(1 + r)^t} − initial investment = 0
Payback period	n y + n/p

n The absolute value of cumulative net cash inflow at which the last negative value of cumulative net cash inflow occurs, n _y the number of years after the initial investment at which the last negative value of cumulative net cash inflow occurs, p the value of net cash inflow at which positive value of cumulative net cash inflow occurs, r discount rate, t number of time periods