Payback Period Calculator
Calculate simple and discounted payback period for investments. Includes NPV, IRR, profitability index, risk-adjusted payback, and side-by-side project comparison.
Payback Period (Years)
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Payback Period (Months) —
Return Multiple (10 years) —
Extended More scenarios, charts & detailed breakdown ▾
Simple Payback (Years)
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Simple Payback (Months) —
Professional Full parameters & maximum detail ▾
Payback Periods
Simple Payback (Years) —
Discounted Payback (Years) —
Risk-Adjusted Payback (Years) —
Value Metrics
Net Present Value —
Estimated IRR —
Profitability Index —
Total Return
Total Undiscounted Return —
How to Use This Calculator
- Enter the initial investment and annual cash inflow to see simple payback period in years and months.
- Use the Discounted tab to find NPV-adjusted payback with a required rate of return.
- Use Compare Projects to evaluate two investment options side by side.
- The Professional tier adds IRR, profitability index, risk-adjusted payback with uncertainty %, and total undiscounted return.
Formula
Simple Payback = Initial Investment ÷ Annual Cash Inflow
Discounted Payback = Year when Cumulative PV Cash Flows ≥ Investment
NPV = −Investment + Σ (CF / (1+r)^t)
PI = PV of Inflows ÷ Initial Investment
Discounted Payback = Year when Cumulative PV Cash Flows ≥ Investment
NPV = −Investment + Σ (CF / (1+r)^t)
PI = PV of Inflows ÷ Initial Investment
Example
Example: $100,000 investment, $25,000/year, 10-year life, 10% discount rate. Simple payback = 4.0 years. Discounted payback = ~6 years. NPV = $53,614. IRR ≈ 21.4%. PI = 1.54.
Frequently Asked Questions
- Payback Period = Initial Investment ÷ Annual Cash Inflow. It measures how long it takes to recover your initial investment. A 4-year payback on a $100,000 investment means you recover the investment in year 4 with $25,000/year inflows.
- The discounted payback period accounts for the time value of money by discounting future cash flows at your required rate of return. It's always longer than the simple payback period and is a more conservative measure.
- It depends on the industry. Tech projects often require 1–2 year paybacks. Manufacturing equipment: 3–5 years. Real estate: 7–15 years. Compare against your cost of capital and the project's useful life — payback should be significantly shorter than the asset's life.
- NPV = Sum of (Discounted Cash Inflows) − Initial Investment. A positive NPV means the project creates value above your required return. NPV > 0 = accept; NPV < 0 = reject. It's considered the most theoretically sound capital budgeting metric.
- PI = PV of Future Cash Flows ÷ Initial Investment. PI > 1.0 means the project creates value. It's useful for ranking projects when capital is limited — choose projects with the highest PI when you can't fund everything.