In
investment decisions, the number of years it takes for an
investment to recover its initial
cost after accounting for
inflation,
interest, and other matters affected by the
time value of money, in order to be worthwhile to the
investor. It differs slightly from the payback period rule, which only accounts for
cash flows resulting from an investment and does not take into account the time value of money. Each investor determines his/her own discounted payback period rule and, as such, it is a highly subjective rule. In general, however, short-term investors use a short number of years, or even months, for their discounted payback period rules, while long-term investors measure their rules in years or even decades.