Payback Period Calculator
Calculate the payback period of an investment based on initial investment and cash flows. The payback period is the time it takes for an investment to generate enough cash flows to recover the initial investment cost.
Payback Period: 0 years
Discounted Payback Period: 0 years
| Initial Investment | $0.00 |
|---|---|
| Annual Cash Flow | $0.00 |
| Total Cash Flows | $0.00 |
| Net Profit | $0.00 |
Payback Period: 0 years
Discounted Payback Period: 0 years
| Initial Investment | $0.00 |
|---|---|
| Total Cash Flows | $0.00 |
| Net Profit | $0.00 |
About Payback Period Calculator
The payback period is the time required to recover the cost of an investment. It is calculated by dividing the initial investment by the annual cash inflow. The shorter the payback period, the more attractive the investment is considered to be.
How to Calculate Payback Period
To calculate the payback period:
- Determine the initial investment amount
- Estimate the annual cash inflows
- Divide the initial investment by the annual cash inflow to get the payback period in years
Discounted Payback Period
The discounted payback period accounts for the time value of money by discounting the cash inflows. This provides a more accurate measure of how long it takes to recover the investment in present value terms.
Limitations of Payback Period
While simple to calculate, the payback period has limitations:
- Ignores cash flows after the payback period
- Does not consider the time value of money (unless using discounted payback)
- Does not measure profitability, only recovery time