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. Scope

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.

ASTM Standards

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

Keywords

benefit-cost analysis; building economics; economic evaluation methods; engineering economics; investment analysis; life-cycle cost analysis; maximum acceptable payback period; net benefits; net savings; payback; simple payback; Benefit-cost ratio/analysis; Building economics; Engineering economics; Life-cycle cost (LCC) analysis; MAPP (maximum acceptable payback period); Maximum acceptable payback period; Net benefits analysis (of buildings); Payback; Simple payback

ICS Code

ICS Number Code 03.060 (Finances. Banking. Monetary systems. Insurance); 91.010.99 (Other aspects)

DOI: 10.1520/E1121-12

ASTM International is a member of CrossRef.

ASTM E1121