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Payback Period Calculator

Calculate simple or discounted payback period from initial investment and cash inflows.

Use the Payback Period Calculator

Enter initial investment and cash inflows (constant or by year). Optional discount rate for discounted payback.

Investment & cash inflows

Initial investment and either constant annual inflow or year-by-year inflows. Optional discount rate for discounted payback.

Results

Payback period
4 yr 0 mo

Payback = time until cumulative cash inflow ≥ initial investment. Discounted payback uses present value of inflows at the given rate.

What this metric means

Payback period answers: how long until I get my money back? It's easy to explain but doesn't measure profitability beyond the payback point.

How to calculate it

Simple: cumulate cash inflows until sum ≥ initial investment; interpolate within the year if needed. Discounted: discount each year's inflow at the given rate, then cumulate.

How to improve the metric

Increase early cash inflows; reduce initial investment; or improve project efficiency. Shorter payback reduces risk and frees capital sooner.

Common mistakes

Ignoring time value of money when it matters; using before-tax vs after-tax inconsistently; or excluding working capital and follow-on investment.

How to interpret your result

Use payback as a risk and liquidity indicator. Combine with NPV or IRR to decide; a short payback with negative NPV is still a bad project.

FAQs

What is payback period?▾
Time until cumulative cash inflows equal or exceed the initial investment. Simple payback ignores time value of money; discounted payback uses present value.
When to use discounted payback?▾
When you want to account for the cost of capital. Discounted payback is longer than simple payback because future cash is worth less today.
What's a good payback period?▾
It depends on risk and opportunity cost. Shorter payback means faster recovery; use with NPV or IRR for full picture.
Constant vs year-by-year?▾
Constant: same cash inflow every year (e.g. annuity). Year-by-year: enter each year's inflow for irregular patterns.

Related tools

Browse all calculators on NetGrow.

NetGrow

Payback Period Calculator

Calculate simple or discounted payback period from initial investment and cash inflows.

Use the Payback Period Calculator

Enter initial investment and cash inflows (constant or by year). Optional discount rate for discounted payback.

Investment & cash inflows

Initial investment and either constant annual inflow or year-by-year inflows. Optional discount rate for discounted payback.

Results

Payback period
4 yr 0 mo

Payback = time until cumulative cash inflow ≥ initial investment. Discounted payback uses present value of inflows at the given rate.

What this metric means

Payback period answers: how long until I get my money back? It's easy to explain but doesn't measure profitability beyond the payback point.

How to calculate it

Simple: cumulate cash inflows until sum ≥ initial investment; interpolate within the year if needed. Discounted: discount each year's inflow at the given rate, then cumulate.

How to improve the metric

Increase early cash inflows; reduce initial investment; or improve project efficiency. Shorter payback reduces risk and frees capital sooner.

Common mistakes

Ignoring time value of money when it matters; using before-tax vs after-tax inconsistently; or excluding working capital and follow-on investment.

How to interpret your result

Use payback as a risk and liquidity indicator. Combine with NPV or IRR to decide; a short payback with negative NPV is still a bad project.

FAQs

What is payback period?▾
Time until cumulative cash inflows equal or exceed the initial investment. Simple payback ignores time value of money; discounted payback uses present value.
When to use discounted payback?▾
When you want to account for the cost of capital. Discounted payback is longer than simple payback because future cash is worth less today.
What's a good payback period?▾
It depends on risk and opportunity cost. Shorter payback means faster recovery; use with NPV or IRR for full picture.
Constant vs year-by-year?▾
Constant: same cash inflow every year (e.g. annuity). Year-by-year: enter each year's inflow for irregular patterns.

Related tools

Browse all calculators on NetGrow.