The four parts of the basic present value equation are:

1. Present value (PV): This is the current value of future cash flows, taking into account the time value of money. It represents the worth of a future cash flow in today's dollars.

2. Future cash flows (CF): These are the expected cash flows to be received or paid in the future. They can be positive (inflow of cash) or negative (outflow of cash).

3. Discount rate (r): This is the rate used to calculate the present value of future cash flows. It reflects the opportunity cost of investing in a project or the required rate of return.

4. Time (t): This refers to the period over which the future cash flows occur. It is usually measured in years but can be in any unit of time.

The payback period is a measure used to assess the length of time it takes to recover the initial investment in a project or investment. It is calculated by dividing the initial investment by the annual cash flows. The payback period can also be determined by accumulating the cash flows until they equal or exceed the initial investment.

The payback period provides information about the time it takes for an investment to generate enough cash flows to cover its initial cost. It helps to assess the risk and liquidity of the investment. A shorter payback period indicates a faster recovery of the initial investment and suggests a quicker return on investment.

The payback criterion decision rule is a guideline used to make investment decisions based on the payback period. It states that an investment should be accepted if its payback period is less than a pre-determined threshold or target period. This threshold is usually set by the company or investor and represents the maximum acceptable time for the investment to recoup its initial cost. If the payback period exceeds the threshold, the investment is typically rejected.

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