Payback Period Calculator

The following payback period calculators give out payback period, discounted payback period, average return, and schedules of investments.

With Steady Cash Flow

Initial Investment$ 
Cash Flow$/Year
% /Year
Number of Years 
Discount Rate%

With Irregular Cash Flow

Initial Investment $ 
Discount Rate%
 Cash Flow
Year 1.$
Year 2.$
Year 3.$
Year 4.$
Year 5.$
Year 6.$
Year 7.$
Year 8.$

RelatedInvestment Calculator | Average Return Calculator

Payback period is the period of time needed to reach the break-even point of an investment based on cash flow. For example, if a $100 investment has an annual payback of $20, the payback period is 5 years. The formula is:

    PP = I / C

Where, PP is payback period, I is investment amount, C is the cash flow per year.

One serious limitation of payback period is that it does not consider the time value of money. Discounted payback period is a solution, which is the period of time to reach the break-even point based on the net present value (NPV) of the cash flow. The NPV was calculated based on a discount rate. For example, if a $100 investment has an annual payback of $20 and the discount rate is 10%. The NPV of the first $20 payback is $20/1.1 = $18.18, the NPV of the second payback is $20/1.12 = $16.53, .... With this, the break-even point is 7.27 years, which is longer than 5 years. The formula of discounted payback period is:

    DPP = - ln(1 - IR/C)/ln(1 + R)

Where, DPP is discounted payback period, I is investment amount, C is the cash flow per year, R is the discount rate.

Payback period and discounted payback period are widely used and is very easy to understand. However, they do not account for the risk, opportunity cost, etc., which are also very important considerations in investment.