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Payback Period Calculator
Use this free Payback Period Calculator to determine how long it takes to recover your investment. Simple, accurate, and easy to use online.
The Payback Period Calculator determines the amount of time it takes for an investment to generate enough cash flow to recover its initial cost.
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INPUT VALUES
Payback Period Calculator
The Payback Period Calculator tells you exactly how long it takes to recover the cost of an investment. It is a measure of risk and liquidity—the shorter the payback period, the less risky the investment generally is.
Business owners use this to prioritize equipment purchases or projects that return cash quickly to the company.
Why You Need This Tool
- Risk AssessmentTime is risk. Quicker payback means less time for things to go wrong.
- Liquidity ManagementEnsures cash isn't tied up for too long.
- Simple ScreeningA quick 'first pass' to filter out bad projects.
The Mathematics Behind It
How to Use This Calculator
Cost of the project.
Net cash expected per year.
Understanding Your Results
Payback Period
Years/Months to break even.
Common Mistakes to Avoid
- Ignoring Value After Payback: It ignores profits made after the break-even point.
- Ignoring Time Value: Standard Payback ignores the fact that future money is worth less.
Frequently Asked Questions
What is a discounted payback?
It calculates payback using discounted cash flows (PV) to account for time value.