Payback Period & Discounted Payback Period Calculator

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Payback Period & Discounted Payback Period Calculator

Payback Period is the time required to recover the initial investment from the cash inflows generated by the investment.
Discounted Payback Period is the time required to recover the initial investment after considering the time value of money by discounting future cash flows. More info →

Input

Initial Investment

Discount Rate (%) (Optional)

Cash Flow Type

Fixed Cash Flow Amount

Number Of Periods

Annual Cash Flows

Positive and negative cash flows are supported

Enter investment details and cash flows to calculate payback period.

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How This Calculator Works

Payback Period tells you how long it takes for an investment's cash inflows to repay what you put in. If you add a discount rate, the calculator also works out the Discounted Payback Period, which counts each future cash flow at its value today and so always takes longer.

The Formula

Payback = Full years before recovery + (Amount still to recover ÷ Next year's cash flow)

For discounted payback, each cash flow is first divided by (1 + r)^t, where t is its year.

What Each Input Does

Initial Investment: The upfront amount that needs to be recovered.
Discount Rate (%) (Optional): Leave it blank for simple payback only. Enter a rate to also see the discounted payback.
Cash Flow Type: Fixed – the same amount every year for the number of periods you enter.
Variable – a different amount for each year, in order. Cash flows are assumed to arrive at the end of each year.

Step by Step

Cash flows are added up year by year (a running total).
The year in which the running total reaches the investment is found.
The part of that year needed is worked out from how much was still left to recover.
The result is shown in years (2 decimals) and as years and months.
With a discount rate, steps 1–4 are repeated using discounted cash flows.

Reading the Result

Shorter payback – your money comes back sooner, with less risk.

Not recovered – the cash flows entered never repay the investment.

Quick Example

Initial investment 100,000, fixed cash flow of 30,000 for 5 years, discount rate 10%. After 3 years 90,000 is back, and 10,000 of year 4's 30,000 is needed, so payback = 3 + 10,000 ÷ 30,000 = 3.33 years (3 years 4 months). Using discounted cash flows, the discounted payback is 4.26 years (4 years 3 months).