Payback Period Calculator
Calculate how long an investment takes to pay back its initial cost from annual cash flows. Useful for capital-budgeting comparisons.
Inputs
Set to 0 for plain payback. Above 0 calculates discounted payback.
Payback period
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In months
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Simple annual ROI
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Total cash flow over 10 yr
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About Payback Period Calculator
Plain vs discounted
Plain payback ignores the time value of money. Discounted payback (set a non-zero rate) accounts for the fact that future cash flows are worth less than present ones — gives a longer, more realistic payback.
Strengths and weaknesses
Strength: easy to compute, gives a sense of liquidity risk. Weakness: ignores cash flows after the payback period and (for plain payback) ignores time value. Use alongside NPV/IRR for real decisions.
Typical thresholds
Many companies require payback under 3-5 years for new equipment investments. Real estate and infrastructure tolerate longer periods. Software/IT projects often demand under 18 months.