Payback Period Calculator

How many years until cumulative cash flows equal the initial investment.

Inputs

Result

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How to use this calculator

  • Enter initial investment.
  • List annual cash flows.
  • Read payback period in years (with fractional interpolation).

About this calculator

Payback period is the simplest capital-budgeting metric: how long until cumulative cash flows recoup the initial investment. Doesn't account for time value of money or post-payback cash flows — that's why most analysts pair it with NPV/IRR. Useful as a liquidity / risk indicator.

Frequently asked

Pros of payback period?+
Simple to compute and explain. Useful for liquidity assessment ("get my money back fast"). Works as a quick screen.
Cons?+
Ignores time value of money. Ignores cash flows AFTER payback. Can rank projects wrong.
Discounted payback?+
Uses discounted cash flows instead of raw — fixes the time-value problem but still ignores post-payback flows.
What's a typical target?+
Industry-specific. Tech projects: 1-3 years. Industrial equipment: 3-7 years. Real estate: 10-15+.
Why does the calculator use linear interpolation?+
Cash flows happen continuously through the year. Interpolation gives a more accurate fractional payback than just rounding to whole years.

Related calculators

Discounted Payback Period Calculator
Years for discounted cash flows to recoup initial investment. Time-value-aware variant of payback.
NPV (Net Present Value) Calculator
NPV = sum of discounted future cash flows minus initial investment. Positive NPV = accept project.
IRR (Internal Rate of Return) Calculator
IRR = the discount rate that makes NPV = 0. Solved numerically via Newton's method.
Profitability Index Calculator
PI = (NPV + initial) / initial = PV of future flows / initial investment. >1 = accept.
MIRR (Modified IRR) Calculator
IRR with explicit reinvestment-rate assumption. Avoids the multiple-IRR problem.
Present Value Calculator
PV = FV / (1 + r)^n. The current worth of a future cash flow.

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