Payback Period Calculator
Calculate the number of years required to break even from an initial investment and with steady cash flow.
Your calculation result will show up here.
Your payback period is:
Your discounted payback period is:
What is simple and discounted payback?
Payback estimates the time required for cash inflows to recover an initial investment. Discounted payback also reduces future cash flows by the discount rate you enter.
How to use this tool
Simple payback = initial investment ÷ annual cash flow. With a constant annual cash flow C, initial investment I, and decimal discount rate r, discounted payback = −ln(1 − I × r ÷ C) ÷ ln(1 + r). At a zero discount rate, it equals simple payback.
Example
A $10,000 investment returning $2,500 annually has simple payback of four years. At a 10% discount rate, the formula gives about 5.36 years.
Understanding your result
Use positive cash flow and a nonnegative discount rate. If discounted inflows cannot recover the investment, there is no finite discounted payback. The model assumes constant annual flows and does not measure returns after recovery or investment risk.
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