Payback Period Calculator
Calculate how long it takes to recover an initial investment.
Payback Period: —
Payback period = Initial investment / Annual cash flow
Example
Investment: 10,000
Annual cash flow: 2,500
Payback period: 4 years
Annual cash flow: 2,500
Payback period: 4 years
What is the payback period?
The payback period measures how long it takes for an investment to generate enough cash flow to recover its initial cost.
Why use the payback period?
It is commonly used in capital budgeting to assess liquidity risk and compare investment recovery times.
Frequently Asked Questions
Does this consider discounting?
No. This calculator uses the simple payback period, not discounted payback.
What if cash flow is zero?
The payback period cannot be calculated if cash flow is zero.
Is a shorter payback better?
Generally yes, as it means faster recovery of invested capital.