Payback Period Calculator
Find how long it takes to get your money back.
How long to get your money back
The payback period is the time until the running total of cash flows turns positive. It is simple and easy to explain, but it ignores everything that happens after payback. The discounted payback period adjusts each cash flow for the time value of money, so it is always longer.
Example
For cash flows of −1,000, 300, 400, 500 and 200, the running total turns positive after about 2.6 periods (the simple payback). Discounted at 8%, the payback takes about 2.96 periods.
Use it as a quick screen for risk and liquidity, alongside NPV and IRR. A project that pays back quickly is not necessarily the most profitable one over its whole life.
Frequently asked questions
Is a shorter payback better?
Usually it means less risk, but it can ignore larger profits that come later.
What discount rate should I use?
Your required return or cost of capital.
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