Payback Period Calculator
How long an investment takes to earn back what it cost — in cash and in today’s money.
Cumulative cash flow
Payback is where a line crosses zero. Columns are each period’s cash flow. Move over the chart (or tap it) for the figures.
Cash flows period by period
How this was calculated
Results are estimates for general information and planning, not financial advice. Banks and institutions may calculate differently (rounding, fees, rate changes). Confirm figures with your lender or a qualified adviser before deciding.
About the Payback Period Calculator
The payback period is how long an investment takes to earn back what it cost: the time until the running total of its cash flows turns from negative to zero. The discounted payback period asks the same question in today’s money — each future cash flow is first discounted at your required return — so it is always longer when the rate is above zero, and it tells you when the investment has also earned that return.
Enter even cash flows (an investment and the same amount every period) or uneven ones, period by period, by the year, half-year, quarter or month. The calculator gives both paybacks in periods, years and months, the month of break-even and, with a start date, its calendar date; it checks a cutoff, shows the net present value, the most cash the project ties up and a chart of the cumulative cash flow, with the table behind it. Nothing you enter leaves your browser.
How to use it
- Choose Even cash flows or Uneven cash flows, and whether one period is a year, a half-year, a quarter or a month.
- Even: enter the investment, the cash coming in each period and for how many periods. Uneven: enter the investment in period 0 as a negative amount (the ± button changes the sign on a phone), then the net cash of each period after it — or paste a column from a spreadsheet, or add a series of equal or growing amounts.
- Enter a discount rate in % a year for the discounted payback; leave it empty for the simple payback only.
- Optionally enter the start date for the calendar date of break-even, a cutoff — the longest payback you accept — and whether the cash arrives evenly through each period or only at its end.
- Read the paybacks, the break-even month and the chart; copy the summary or download the table as CSV.
Examples
Running total −500,000 → −350,000 → −150,000 → +100,000 Simple payback 2 + 150,000 ÷ 250,000 = 2.6 years: month 32 Discounted payback 3 + 10,518 ÷ 136,603 = 3.08 years: month 37 NPV 188,176
Simple payback 100,000 ÷ 25,000 = 4 years Discounted payback 5.37 years
The present values of the first five years add up to 94,770, and year 6 is worth 14,112 today: 5 + 5,230 ÷ 14,112 = 5.37.
Simple payback 2.6 years: within the cutoff Discounted payback 3.08 years: longer than the cutoff
Common uses
- Check how quickly a machine, a vehicle, solar panels or new software pays for itself.
- Compare projects by how long the money is at risk, beside their NPV.
- Find the month in which a new shop, product or contract breaks even on its start-up costs.
- Test a project against the payback cutoff a lender, an investor or your own policy sets.
How payback is worked out
Payback = whole periods before the running total reaches zero + unrecovered amount at the start of the next period ÷ that period’s cash flow
With even cash flows this is simply investment ÷ cash flow per period. In the period in which the running total turns positive, the cash is assumed to come in evenly, which is what makes 2.6 years possible rather than 3. If your cash really arrives in one payment at the end of each period — an annual contract fee, a harvest — choose at the end of each period: the payback is then a whole number of periods.
The month of break-even is the payback in months rounded up: 2.6 years is 31.2 months, so the running total reaches zero during month 32. With a start date the calculator puts that on the calendar.
Discounted payback
Each cash flow is first discounted to today: PVₜ = CFₜ ÷ (1 + r)ᵗ, where r is the rate per period. The discounted payback is the time until the running total of these present values reaches zero — the point at which the investment has paid itself back and earned the rate r on the money tied up. For half-years, quarters and months the yearly rate R becomes (1 + R)^(1/k) − 1 per period: 10% a year is 2.41% a quarter.
If the running total of present values never reaches zero, the project earns less than the rate over the periods entered — its net present value is negative.
What payback does not tell you
- Cash after the payback point is ignored. Two projects that pay back in three years look the same even if one stops there and the other earns for ten more years. The net cash and NPV figures show what payback leaves out.
- The simple payback ignores the time value of money: 100,000 in year 3 counts as much as 100,000 today. The discounted payback corrects that.
- The cutoff is a choice, not a rule from finance theory.
Brealey, Myers and Allen’s Principles of Corporate Finance treats payback for these reasons as a rough guide, not a decision rule, and recommends the NPV for accepting or rejecting projects. Payback stays useful for what it measures: how long your money is at risk and when cash comes back — important when cash is tight. Work out the NPV and the IRR with the NPV calculator and the IRR calculator.
Uneven cash flows and later outlays
Enter every period’s net cash flow: money in minus money out. A refit or a replacement in a later year is a negative amount in that year. If it pushes the running total below zero again after it had reached zero, the calculator shows the first time it reached zero and the final payback, after which it stays at or above zero. A blank between two amounts counts as a period with no cash flow.
The most cash tied up is the lowest point of the running total: the funding the project needs before it starts paying for itself.
Limitations
- The answer is only as good as the cash-flow forecast: include taxes, maintenance and the effect on working capital in the cash flows themselves.
- Within the payback period the cash is assumed to arrive evenly (or at the end of each period, if you choose that); real cash flows are lumpier.
- One discount rate for the whole life; a rate per period or exact dates are in the NPV calculator.
- Up to 1,200 periods at a time.
Privacy
Everything is calculated in your browser. The cash flows, rates and results are never uploaded or stored on a server.
Frequently asked questions
What is the payback period formula?
For even cash flows, payback = investment ÷ cash flow per period: 100,000 ÷ 25,000 a year = 4 years. For uneven cash flows, add up the cash flows until the running total turns positive, then add the unrecovered amount ÷ the cash flow of that period: 2 + 150,000 ÷ 250,000 = 2.6 years.
What is the difference between payback and discounted payback?
The simple payback adds up the cash flows as they are. The discounted payback first discounts each one to today at your required rate, so later money counts for less. It is longer, and it shows when the investment has also earned that rate.
What is a good payback period?
There is no single answer: it depends on the risk, the life of the investment and how soon you need the cash back. Many businesses set a cutoff of their own for each kind of project. A payback longer than the life of the asset means it never pays for itself.
How do I find the month of break-even?
Multiply the payback in years by 12 and round up: 2.6 years × 12 = 31.2 months, so the investment breaks even in month 32. Enter the start date and the calculator gives the calendar date.
Should I decide on payback alone?
No. Payback ignores the cash after the payback point, so it can favour a quick but small project over a better one. Use it for liquidity and risk, and the net present value to decide whether a project adds value.