Payback period and Waterfall Chart

It is an easy wasy to visualize the free cashflow of your investments in a waterfall chart in excel.

Payback period is a metric that commonly used in investments. It is measure the number of years, the investment will be provide positive cashflows. In the start of calculation have to insert the cost of investment (i.e. purchase of machinery, facilty etc.) and other related expenses. Such as issuance expenses of loans, laywer fees etc. The outcome is in absolute numers and doesn't take into account the effect of inflation. The other two metrics (NPV and IRR) convert the free cashflows of future into present value through discount.

For the calculation take into account, the unlevered free cashflow (without paying financial obligations). Levered is the cashflow remaining after interest payment on loans. 

Payback period is important to be known in the beginning of an invstement due to the fact that the investors will be able to take "back money". For an example, if the payback period is 2 years then the company from second years and onwards  will have money to pay cover financial ovbligations and investors. 

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