Final answer:
The payback period is the time required for investment cash outflows to be recouped as cash inflows or savings, and it is used to assess the investment in insulation based on energy cost savings.
Step-by-step explanation:
The length of time it takes for the investment cash outflow to be returned in the form of cash inflows or savings is known as the Payback Period.
In the context of adding insulation to a building, if the energy costs are $1.00 per million joules and the insulation costs $4.00 per square meter, the simple payback time can be calculated by determining the annual savings in energy costs due to the insulation and then dividing the total cost of the insulation by these annual savings. The average temperature difference (AT) during the heating season is also factored into the calculation to establish the impact of insulation on energy consumption.