78 Appendix 9: Overview of investment analysis measures Appendices would not be feasible. The 1.7 ratio means that a dollar invested today will return a cumulative $1.70 over the ten-year time period. Payback period This is the length of time from the beginning of the investment (consisting of tuition and earnings foregone) until higher future earnings give a return on the investment made. For the student in Table A9.1, it will take roughly 4.2 years of $5,000 worth of higher earnings to recapture his investment of $1,500 in tuition and the $20,000 in earnings foregone while attending the college. Higher earnings that occur beyond 4.2 years are the returns that make the investment in education in this example economically worthwhile. The payback period is a fairly rough, albeit common, means of choosing between investments. The shorter the payback period, the stronger the investment.
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