Payback Period Calculator
Find the payback period — how long until an investment recovers its cost from annual cash inflows — and see it against a typical 3–5 year target.
Where you land
Year-by-year cash flow schedule
Cumulative cash flow, plain and discounted, until the investment breaks even.
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Learn moreReading the payback period
The payback period is the time for an investment’s cash inflows to recoup its upfront cost. It is a fast, intuitive screen for risk — shorter is safer — but it ignores the time value of money and any cash flows after payback. Pair it with ROI or NPV for capital decisions. Many businesses look for a payback under 3–5 years.
How it’s calculated & sources
Payback period = initial investment ÷ annual cash inflow (simple method, even cash flows). Simple annual return = inflow ÷ investment. Compared to a typical 3–5 year hurdle.
Fixed vs irregular cash flow: in fixed mode the same annual inflow repeats every year; in irregular mode you enter a different cash flow for each of up to 8 years, and the calculator walks the actual year-by-year values instead of a single repeated number. Both modes share one initial investment and one discount rate.
Discounted payback period applies the same break-even logic to the present value of each year’s cash flow, CF÷(1+r)^t, where r is the discount rate you enter. Because discounting shrinks later cash flows, the discounted payback period is always the same as or longer than the plain payback period — it is the point where cumulative discounted cash flow first turns non-negative, interpolated within that year.
Benchmark: common corporate payback target of under 3–5 years (varies by industry and asset life).
Results update as you type and are general estimates, not personalized advice. Verify with a professional.
Worked example
A $25,000 investment returning $8,000/year pays back in about 3.1 years (~38 months), a ~32%/yr simple return — right around a moderate target.
Frequently asked questions
What is a good payback period?
Shorter is better; many firms want under 3–5 years, but capital-intensive assets accept longer.
What does payback ignore?
The time value of money and any cash flows after breakeven. Discounted payback and NPV address that.
Even vs uneven cash flows?
Switch the “Cash flow type” selector to “Irregular cash flow by year” to enter a different amount for each year instead of one repeating inflow — the calculator then subtracts each year’s actual value until the cumulative total turns positive.
What is discounted payback period?
It is the payback period calculated on the present value of each year’s cash flow instead of its face value, using the discount rate you enter. It always takes the same amount of time or longer than the plain payback period because future cash flows are worth less today.