Payback period calculator
The payback period is how many years it takes for a project's cash flows to return its cost. The discounted version accounts for the time value of money.
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How to use it
- Enter initial investment, yearly cash flows (one per line) and discount rate for discounted payback.
- The result appears straight away and updates as you edit.
- Copy the result, or copy a link that keeps the same values to share it.
How it is calculated
Add the flows year by year until the total covers the investment. Period = full years before recovery + (amount still owed ÷ that year's flow). The discounted version uses flow ÷ (1 + rate)^t.
Example
Inputs: Initial investment = 10,000, Discount rate for discounted payback = 10 %. Result: Simple payback period: 2.6 years; Discounted payback period: 3.15 years.
Limits and caveats
- The fraction of a year assumes each year's flow arrives evenly through that year.
- It ignores everything after payback, so use it alongside NPV or IRR.
Questions about this tool
What is the difference between simple and discounted payback?
Simple payback adds the flows as they are, while discounted payback shrinks each flow by how far away it is, so it is always longer at a positive rate.
What does 2.6 years mean?
Two full years plus about 60% of the third, roughly seven and a half months into it.
What if the flows are equal every year?
Simple payback is then investment ÷ yearly flow. Enter the same value on each line and you get the same answer.