Payback Period Calculator
How long until an investment pays for itself? Enter a fixed annual cash flow (optionally growing each year) or a list of irregular yearly cash flows, and get the payback period, the discounted payback period that accounts for the time value of money, and a full cumulative cash flow table.
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Payback Period
3.16 years
Discounted payback: 3.92 years · Total inflows $165,769
- Initial Investment
- $100,000
- Total Cash Inflows
- $165,769
- Net Gain Over Period
- $65,769
- Simple Payback
- 3.16 years
- Discounted Payback
- 3.92 years
- NPV of Flows at End
- $24,518
- Breakeven Year
- During Year 4
- Average Annual Cash Flow
- $33,154
How the payback period was found
- 1List the cash flowsY1: $30,000, Y2: $31,500, Y3: $33,075, Y4: $34,729, Y5: $36,465
- 2Accumulate until the investment is recoveredInitial $100,000 is crossed once cumulative reaches $165,769
- 3Interpolate within the crossing yearPayback = 3.16 years (fraction = unrecovered ÷ that year's flow)
- 4Repeat with discountingEach flow is divided by (1 + 10.0%)^t before accumulating → discounted payback 3.92 years
Cumulative cash flow schedule
Payback period ignores both the time value of money and any cash flows after breakeven — it measures risk and liquidity, not profitability. Pair it with NPV or IRR before committing capital; the discounted variant at least corrects for the time value of money.
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Formula
Payback = (years before full recovery) + (unrecovered cost ÷ cash flow in recovery year); Discounted CF_k = CF_k / (1+d)^k
Pro tips
- • Shorter payback = less exposure, but always weigh it against total return — a fast payback can hide a small NPV.
- • Use the discounted payback for capital budgeting decisions when financing costs are meaningful.
- • Include taxes, maintenance and working-capital swings in your cash flows, not just revenue minus COGS.
FAQ
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