[Verse 1]
When investing in a project, time matters most of all
Simple payback shows the years before your cash will call
Divide initial cost by annual cash flow coming in
Count the years until you break even and begin to win
[Chorus]
Payback period, how long to wait
Profitability index, which projects rate
Simple math or discount it down
PI above one, the best deals found
Time to recover, money made back
These are the tools to keep you on track
[Verse 2]
But simple payback ignores the time value of your gold
Discounted payback tells a story that's more controlled
Take those future cash flows, discount them to today
Present value accumulates until breakeven comes your way
[Chorus]
Payback period, how long to wait
Profitability index, which projects rate
Simple math or discount it down
PI above one, the best deals found
Time to recover, money made back
These are the tools to keep you on track
[Bridge]
Profitability index is the ranking game
Present value of cash flows divided by initial claim
If PI is greater than one, the project adds value true
Less than one means reject it, more than one means pursue
When you're ranking multiple projects, highest PI wins
That's where your investment journey really begins
[Verse 3]
Payback has its limits, doesn't show the full return
Ignores cash flows after payback, lessons we must learn
Use it with other methods, NPV and IRR
Together they paint the picture of how profitable you are
[Chorus]
Payback period, how long to wait
Profitability index, which projects rate
Simple math or discount it down
PI above one, the best deals found
Time to recover, money made back
These are the tools to keep you on track
[Outro]
Simple or discounted, payback shows the time
PI ranks your options, helps your projects shine
CPA knowledge working, making smart decisions
Financial analysis tools, supporting your visions