What is a good payback period for an investment?

Rule of thumb: under 2 years is excellent, 2–4 years is good, 4–6 years is acceptable, over 6 years requires strong justification. Manufacturing equipment: 3–5 years typical. Solar panels: 6–10 years. IT projects: 1–3 years. Payback period ignores time value of money — use NPV/IRR for more accurate analysis.

Payback period vs. NPV vs. IRR — which to use?

Payback period: simple, ignores TVM — good quick filter. NPV: best for comparing projects with different scales and timing. IRR: best for ranking when capital is constrained. Use all three: payback for quick screen, NPV for go/no-go, IRR for ranking. If NPV > 0 and IRR > hurdle rate, invest.