Finance and accounting
Payback and discounted payback period calculator
How long an investment takes to recover its cost from cash flows, with and without discounting, and a cumulative cash flow table.
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One value per period, starting with period 0 (now). Separate with new lines, commas or spaces; enter outflows as negative numbers and no thousands separators.
Result
Method and limits
The payback period is the time until cumulative cash flows turn from negative to zero. The discounted payback uses present values instead, so it is always at least as long.
Payback = (t − 1) + (unrecovered amount at the end of t − 1) / CF_t
where t is the first period in which the cumulative total reaches zeroAssumptions and limits
- The first value (period 0) must be the negative investment.
- Fractions of a period assume the cash flow arrives evenly during that period; the whole-period answer is also given.
- Payback ignores what happens after the cost is recovered, so use it alongside NPV.
- An educational calculation, not financial, tax, legal or investment advice.
Worked example
Brealey, Myers and Allen’s project A costs 2,000 and returns 500, 500 and 5,000. It pays back during year 3 (2.2 years with even cash flows) and its NPV at 10% is 2,624.34; the discounted payback is 2.30 years. Project B (−2,000, then 500 and 1,800) pays back in 1.83 years but never on a discounted basis: its NPV is −57.85.
References
Related tools
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