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Payback Period Calculator

The payback period is the time required to recover the cost of an investment. The discounted payback period factors in the time value of money.

Calculate Payback Period

Results

Payback Period 3.33 Years (3 Years, 4 Months)
Discounted Payback Period 4.25 Years (4 Years, 3 Months)
Total Inflow at Payback $100,000.00
Net Profit at Payback $0.00
Cumulative Recovery vs. Target Investment
Target ($100,000) Yr 0 Yr 6
Regular Cash Flow Discounted Cash Flow Initial Target

Investment Recovery Schedule

Year Cash Inflow Cumulative Cash Flow Cumulative Discounted Unrecovered Investment
Yr 1 $30,000.00 $30,000.00 $27,272.73 $70,000.00
Yr 2 $30,000.00 $60,000.00 $52,066.12 $40,000.00
Yr 3 $30,000.00 $90,000.00 $74,605.56 $10,000.00
Yr 4 $30,000.00 $120,000.00 $95,095.96 Paid off
Yr 5 $30,000.00 $150,000.00 $113,723.60 Paid off
Yr 6 $30,000.00 $180,000.00 $130,657.82 Paid off

Understanding your calculation

Method, example and limitations

How the calculation works

Payback period measures how long cumulative cash receipts take to recover an initial outlay. Discounted payback also adjusts each receipt for the time value of money.

Example to check

An initial cost of $1,000 with $250 received at each year-end reaches simple payback after four years, assuming there are no other cash flows.

Before using the result

Payback ignores cash flows after recovery and, unless discounted, ignores the time value of money. Use it alongside profitability and risk measures rather than as a complete investment decision.

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