A discounted payback period formula takes into account the time value of the money. A normal payback period formula just uses the initial cost of investment and the amount of time it will take to recover the cost. A discounted payback period formula discounts the amount recovered, resulting in a longer payback period. The formula is : years of full recovery + cumulative cash flow/unrecovered
. amount at the beginning of the last year. Get a detailed explanation at www.investopedia.com.