Payback Period Calculator
Calculate how long it takes to recover your investment. Analyze both simple and discounted payback periods.
Same cash flow amount each period
Total upfront cost to be recovered
Amount received each year
Include Discounting
Calculate discounted payback period
Annual rate to discount future cash flows
3 years 4 months
4 years 3 months
$100,000.00
Investment Recovered
Full recovery after 3 years 4 months
Break-even: $50,000.00
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Initial Investment
$50,000.00
Total Cash Flows
$150,000.00
Average Cash Flow
$15,000.00
Profit After Payback
$85,000.00
| Period | Cash Flow | Cumulative | Discounted | Remaining | % Recovered |
|---|---|---|---|---|---|
| 1 | +$15,000.00 | $15,000.00 | $13,636.36 | $35,000.00 | 30% |
| 2 | +$15,000.00 | $30,000.00 | $26,033.06 | $20,000.00 | 60% |
| 3 | +$15,000.00 | $45,000.00 | $37,302.78 | $5,000.00 | 90% |
| 4 | +$15,000.00 | $60,000.00 | $47,547.98 | - | 100% |
| 5 | +$15,000.00 | $75,000.00 | $56,861.80 | - | 100% |
| 6 | +$15,000.00 | $90,000.00 | $65,328.91 | - | 100% |
| 7 | +$15,000.00 | $105,000.00 | $73,026.28 | - | 100% |
| 8 | +$15,000.00 | $120,000.00 | $80,023.89 | - | 100% |
| 9 | +$15,000.00 | $135,000.00 | $86,385.36 | - | 100% |
| 10 | +$15,000.00 | $150,000.00 | $92,168.51 | - | 100% |
Understanding Payback Period
Simple Payback Period
The simple payback period ignores the time value of money - it just counts how long until cumulative cash flows equal the initial investment.
Discounted Payback Period
The discounted payback accounts for the time value of money by discounting future cash flows. This gives a more realistic picture since money received later is worth less than money received today.
Advantages
- Simple to understand and calculate
- Useful for liquidity analysis
- Favors projects that return cash quickly
- Good for risk assessment (shorter = less risky)
Limitations
- Ignores cash flows after payback (simple version)
- Does not measure profitability
- No standard benchmark for "acceptable" payback
- Use alongside IRR and NPV for complete analysis