Payback Period Calculator

Recovery Timeline

See exactly when your investment breaks even

Cumulative Progress

Track cash flow accumulation year by year

Target Comparison

Compare against your target payback period

Risk Assessment

Shorter payback means lower investment risk

Investment Parameters

Initial Investment ($)

Target Payback (years)

Annual Cash Flows

Year 1

Year 2

Year 3

Year 4

Year 5

Recovery Steps

Enter values and click Calculate to see step-by-step breakdown

Results

Initial Investment $50,000.00

Target Payback 3.00 years

                                    Actual Payback Period
                                    0.00 years
                                

Calculate to see investment decision

Cumulative Recovery

Chart will appear after calculation

How to Use

Enter your initial investment amount
Set your target payback period (optional)
Add expected annual cash flows
Click "Calculate Payback" to see results
Review the cumulative recovery progress

Limitations

Ignores time value of money
Ignores cash flows after payback
Does not measure profitability
Best used with other metrics (NPV, IRR)

Examples & Anti-patterns

Good Practice

Use with Other Metrics

Combine payback period with NPV and IRR for a complete investment analysis.

// Investment Analysis:
Payback Period: 2.5 years �?(target: 3)
NPV: $45,000 �?(positive)
IRR: 18% �?(above hurdle rate)

// Decision: ACCEPT - all metrics pass

Common Mistake

Ignoring Cash Flows After Payback

A short payback doesn't always mean a better investment!

// Project A: Payback 2 years
Year 1-2: $50k/year, Year 3-5: $5k/year
Total: $115k

// Project B: Payback 3 years
Year 1-3: $35k/year, Year 4-5: $80k/year
Total: $265k �?Better overall!

Frequently Asked Questions

It depends on the industry and investment type. Generally, 3-5 years is acceptable for most business investments. High-risk ventures may require payback under 2 years.

Discounted payback period adjusts cash flows for time value of money before calculating how long it takes to recover the investment. It's more accurate but results in longer payback periods.

Payback is simple to understand and calculate, provides a quick risk assessment, and is useful for companies with liquidity constraints or uncertain futures.