Payback period calculator
How long an investment takes to pay for itself, with simple and discounted payback.
About this calculator
This payback period calculator shows how long an investment takes to earn back what it cost, from equipment and solar panels to a new business.
Enter the cost and the yearly cash flows, either the same each year or different. It gives both the simple and the discounted payback period.
How it works
Payback adds up each year’s cash flow until it covers the initial investment, counting part of the final year. Discounted payback does the same with each cash flow first divided by (1 + rate)^year, so later money counts for less.
Last reviewed:
Worked example
- Cash flows: The same each year
- Initial investment: $20,000
- Cash flow each year: $4,500
- Number of years: 10 years
- Discount rate: 6% a year
Payback period: 4.44 years
Common questions
What is a good payback period?
It depends on the risk and the life of the investment. A shorter payback is safer, but always compare it with how long the investment will last.
What is the difference between payback and discounted payback?
Discounted payback values each future cash flow in today's money using a discount rate, so it is always longer than simple payback.
Why can payback be misleading?
It ignores cash flows after the payback date and, in its simple form, the time value of money. A project with a slower payback can still earn far more overall.
Sources and further reading
The story behind it
Where the idea came from: Payback is one of the oldest ways to judge an investment, and surveys of company finance chiefs still find it among the most used methods, alongside net present value and IRR.
It is easy to grasp and rewards getting money back quickly, which matters when cash is tight or the future is uncertain. Its weakness is that it ignores everything after the payback date, so pair it with net present value.
Why you can trust this calculator
- It runs in your browser. Nothing you type into it is sent anywhere.
- The method is explained on this page, so you can check it yourself.
- Free to use, with no sign-up.
- Results are estimates, not financial advice.
- Spotted a mistake? Tell us and we'll look into it.
After 15 years as a mathematics educator, I built CalculStore to give students, teachers, professionals and anyone working with numbers simple, reliable tools.
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