Payback Period Calculator
How soon does a project pay for itself?
Your numbers
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$
%
Your results
Payback period (years)
Payback period (years)
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In months
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Discounted payback (years)
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Payback Period Calculator by TheCalcTools
How the Payback Period Calculator works
Enter the upfront cost and the net cash the project earns per year.
Simple payback divides one by the other.
Discounted payback accounts for the time value of money by discounting each year’s cash flow.
The formula
Payback = investment ÷ annual cash flowDiscounted payback n = −ln(1 − I × r ÷ CF) ÷ ln(1 + r)
Worked example
Using the default values shown in the calculator:
| Initial investment | $50000 |
|---|---|
| Net cash flow per year | $14000 |
| Discount rate (for discounted payback) | 8 % |
- Simple payback = $50,000 ÷ $14,000 = 3.57 years (42.9 months).
- At an 8% discount rate, payback takes 4.37 years.
Result:
| Payback period (years) | 3.57 |
|---|---|
| In months | 42.9 |
| Discounted payback (years) | 4.37 |
Frequently asked questions
What are the weaknesses of payback?
It ignores cash flows after the payback date and, in the simple version, the time value of money.
Can payback be 'Never'?
In the discounted case, yes: if the yearly cash flow is no more than the interest on the investment, it never repays.
Sources and further reading
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This calculator gives estimates for information only. Check important results independently before you rely on them. See our disclaimer.