Payback Period Calculator
Simple and discounted payback for even or uneven yearly cash flows.
About this tool
Enter the initial investment and a discount rate, then either a cash inflow that is the same every year with a number of years, or a different amount for each year. The calculator shows the simple payback period, the discounted payback period, the total cash returned and a year-by-year table of cumulative cash, with the payback year highlighted.
How to calculate the payback period
The payback period is how long an investment takes to earn back what it cost. With equal yearly cash flows it is simply cost รท yearly cash. Solar panels costing 12,000 that save 3,500 a year pay back in about 3.43 years, or 3 years and 5 months. With uneven cash flows, add them up year by year until the running total turns positive, then work out the fraction of that year needed, assuming the cash arrives evenly through it. The discounted payback period first converts each future amount into today's money at a discount rate, so it is always longer. The same solar panels take about 3.95 years at 6%. Payback is popular because it is intuitive and highlights how quickly cash is at risk, but it ignores everything that happens after break-even, so a project with a slightly longer payback can still be far more valuable overall. Use it alongside NPV or IRR. Not financial advice. The IRR calculator, the NPV calculator and the break-even calculator complete the picture. How to calculate your break-even point (and what it doesn't tell you) explains break-even in units and sales.
Frequently asked questions
How do I calculate the payback period?
For equal cash flows: initial cost รท annual cash inflow. 12,000 รท 3,500 โ 3.43 years.
What is the discounted payback period?
The payback period after converting future cash into today's money at a discount rate. It is always longer than the simple payback.
What is a good payback period?
It depends on the investment's life and risk. Many businesses look for three to five years on equipment and efficiency projects.
Is my data saved?
No. The calculation runs in your browser and nothing is stored or sent.