Payback Period Calculator

Calculate how long it will take to recover your initial investment based on expected cash flows.

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Simple Payback Period

Discounted Payback Period

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Understanding Payback Period Analysis

The payback period is a crucial financial metric that helps businesses and investors determine how long it will take to recover the cost of an investment. This calculator provides both simple and discounted payback periods:

Simple Payback Period

This method calculates how long it will take to recover the initial investment based on projected annual cash flows, without considering the time value of money. It's straightforward but may not tell the complete story for long-term investments.

Discounted Payback Period

This more sophisticated approach factors in the time value of money through a discount rate, providing a more realistic estimate for long-term investments. It accounts for the fact that future cash flows are worth less than present cash flows due to inflation and opportunity costs.

When to Use This Calculator

Use this calculator when:

  • Evaluating different investment opportunities
  • Planning capital budgeting decisions
  • Comparing projects with different initial investments
  • Assessing risk through timing of cash flow recovery