Payback Period Calculator
Determine how long it will take to recover your initial investment.
Yearly Cash Inflows
Cumulative Cash Flow by Year
| Year | Cash Inflow | Cumulative Cash Flow | Recovered? |
|---|
What is Payback Period?
The payback period is the length of time required for an investment to generate cash flows sufficient to recover its initial cost. It is a simple and widely used metric for assessing investment risk.
How to Use This Calculator
- Enter the initial investment amount.
- Add the expected cash inflow for each year.
- Click Calculate to see the payback period and cumulative cash flow table.
Frequently Asked Questions
What is a good payback period?
Shorter payback periods are generally preferred as they indicate lower risk. A common benchmark is 3-5 years, but this varies by industry and investment type.
Does payback period consider time value of money?
The simple payback period does not. For a time-adjusted version, use the discounted payback period which discounts future cash flows to present value.
What if cash inflows are uneven?
This calculator handles uneven cash flows by accumulating them year by year until the initial investment is fully recovered.
Can the payback period exceed the project life?
Yes, if cumulative cash inflows never reach the initial investment, the project never pays back and should likely be rejected.