<P> Additional complexity arises when the cash flow changes sign several times; i.e., it contains outflows in the midst or at the end of the project lifetime . The modified payback period algorithm may be applied then . First, the sum of all of the cash outflows is calculated . Then the cumulative positive cash flows are determined for each period . The modified payback is calculated as the moment in which the cumulative positive cash flow exceeds the total cash outflow . </P> <P> Payback period doesn't take into consideration the time value of money and therefore may not present the true picture when it comes to evaluating cash flows of a project . This issue is addressed by using DPP, which uses discounted cash flows . Payback also ignores the cash flows beyond the payback period . Most major capital expenditures have a long life span and continue to provide cash flows even after the payback period . Since the payback period focuses on short term profitability, a valuable project may be overlooked if the payback period is the only consideration . </P>

What do you mean by pay back period method