Payback Period Calculator
Calculate the simple and discounted payback period of an investment from its cash flows, with a year-by-year cumulative table and NPV.
About the Payback Period Calculator
The payback period tells you how long an investment takes to earn back its initial cost. Enter the upfront investment and the cash inflow you expect each year, and this calculator returns both the simple payback period and the discounted payback period, plus a full cumulative cash-flow table so you can see exactly when the project crosses break-even.
The simple payback accumulates raw cash flows until they cover the investment, interpolating within the break-even year — recovering the last portion halfway through year 3 gives a payback of 2.5 years. The discounted version first divides each year's cash flow by (1 + r)^year using your discount rate, which respects the time value of money and always gives a longer (more honest) answer. The tool also shows the NPV of the whole series as a sanity check.
Payback period is a liquidity and risk measure, not a profitability measure — it ignores everything that happens after break-even. Use it alongside NPV or IRR when comparing projects, and remember that all figures here are estimates computed privately in your browser.
How to Use the Payback Period Calculator
- 1Enter the initial investment amount.
- 2List the expected cash inflow for each year, separated by commas.
- 3Set your discount rate to see the discounted payback period as well.
- 4Review the cumulative table to see the exact year the project turns positive.
Frequently Asked Questions
How is the payback period calculated? A worked example
Invest 50,000 with inflows of 15,000, 18,000, 20,000 and 22,000. Cumulative: −35,000, −17,000, +3,000. Break-even happens during year 3: you start the year 17,000 short and recover 20,000, so payback = 2 + 17,000/20,000 = 2.85 years. The calculator does this interpolation automatically.
What is the discounted payback period?
The same idea but with each cash flow discounted to present value first. At a 10% rate, year-1 cash of 15,000 is worth 15,000/1.10 = 13,636 today, year 2's 18,000 is worth 14,876, and so on. Because discounted flows are smaller, the discounted payback is always longer than the simple one — in the example above it stretches to about 3.3 years.
What is a good payback period?
It depends on the industry and how fast the underlying assets become obsolete. Small business equipment often targets 2–4 years; commercial real estate and infrastructure accept much longer. Shorter is safer — cash recovered sooner can be reinvested and is exposed to less uncertainty.
What are the limitations of the payback method?
It ignores all cash flows after break-even, so a project that pays back in 3 years then earns nothing beats one that pays back in 4 years then earns for a decade — clearly wrong. It also says nothing about scale of profit. Use it as a risk screen alongside NPV, which this tool also reports.
What does 'Not recovered' mean?
The cumulative cash flow (or discounted cumulative) never reaches zero within the years you entered — the investment does not pay for itself over that horizon. Add more years of cash flows if the project runs longer, or treat it as a red flag.