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
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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.
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?
This uses even annual inflows. For uneven flows, subtract each year until the cumulative total turns positive.