Payback Period Calculator
Work out how long it takes for a project to return the money you put in, with or without discounting.
Last updated · View algorithm, constants and default inputs (JSON)
Cumulative cash flow
Year-by-year recovery
Swipe horizontally to see more
| Year | Cash flow | Cumulative cash flow | Cumulative discounted |
|---|---|---|---|
| 1 | 6,000.00$ | 6,000.00$ | 5,555.56$ |
| 2 | 6,000.00$ | 12,000.00$ | 10,699.59$ |
| 3 | 6,000.00$ | 18,000.00$ | 15,462.58$ |
| 4 | 6,000.00$ | 24,000.00$ | 19,872.76$ |
| 5 | 6,000.00$ | 30,000.00$ | 23,956.26$ |
| 6 | 6,000.00$ | 36,000.00$ | 27,737.28$ |
| 7 | 6,000.00$ | 42,000.00$ | 31,238.22$ |
| 8 | 6,000.00$ | 48,000.00$ | 34,479.83$ |
| 9 | 6,000.00$ | 54,000.00$ | 37,481.33$ |
| 10 | 6,000.00$ | 60,000.00$ | 40,260.49$ |
About this calculator
The payback period is the time until cumulative cash flow covers the initial outlay. It ignores everything after that point, which makes it a blunt instrument — but it is still the fastest way to screen a project. The discounted version counts the same years while shrinking each year of cash flow by your discount rate.
Worked example
calculated with the default values below
Initial investment 20,000 $ · Annual cash flow 6,000 $ · Discount rate 8 % · Years to project 10 years Payback period 3.33 years · Discounted payback period 4.03 years · Total cash received 60,000 $ · Present value of inflows 40,260 $ · Surplus after payback 40,000 $
General background references
Disclaimer
These calculators give estimates for general information only. They are not financial, tax or investment advice and do not take your personal circumstances into account. Before borrowing, investing or filing, confirm the numbers with a qualified adviser in your jurisdiction.
Implementation source
This record describes the implementation used by this page. It is not independent validation. External references, when available, support only the stated formula or definition; estimates and custom rules retain their own assumptions.
Formula and variables
PB = I ÷ C; PV_t = C ÷ (1 + r)^t; t = min{j ∈ ℕ : Σ_{k=1}^{j} PV_k ≥ I}; DPB = t − 1 + (I − Σ_{k=1}^{t−1} PV_k) ÷ PV_t
- I
- Initial investment
- C
- Annual net cash flow
- r
- Discount rate
- t
- First year cumulative PV reaches I
- PV_t
- Present value of year-t cash flow
Simple payback = initial investment / annual cash flow, assuming constant year-end inflows. Discounted payback accumulates each annual cash flow discounted at the entered rate and interpolates within the recovery year; if recovery does not occur within the modeled horizon, discounted payback is undefined.
Frequently asked questions
What if the investment does not pay back within the project period?
The simple payback result assumes the entered annual cash flow continues at the same level. Discounted payback is left undefined if discounted cumulative cash flows do not recover the initial investment within the modeled years.
What does the payback period leave out?
Everything that happens after the break-even point, and the timing of the cash flows before it. Two projects can both pay back in three years with wildly different total returns, and a project that only pays back in year nine can still be far more valuable than one that pays back in year two. Use it as a liquidity filter, not a verdict.
Should I decide on payback or on net present value?
On net present value when the goal is to maximise value, because it accounts for the time value of money and for everything after break-even. Payback answers a different question: how long your capital is exposed. Where capital is constrained or the risk of obsolescence is high, that second question can genuinely dominate.