The Payback Period Calculator finds how long an investment takes to recover its cost, both with and without discounting, along with NPV and IRR.
| Payback period | 3.16 years |
| Discounted payback period | 3.92 years |
| Net present value (NPV) | $24,517.74 |
| Internal rate of return (IRR) | 18.86% |
| Total cash flow | $165,768.94 |
| Payback period | 3.88 years |
| Discounted payback period | 5.45 years |
| Net present value (NPV) | $3,095.55 |
| Internal rate of return (IRR) | 10.96% |
| Total cash flow | $145,000.00 |
The payback period is the time it takes for an investment's cash inflows to repay its initial cost. It is popular because it is easy to understand: a machine that costs $100,000 and saves $30,000 a year pays for itself in a little over three years.
Simple payback ignores the time value of money. The discounted payback period first discounts each year's cash flow at a chosen rate, so it is always longer than simple payback and gives a more realistic picture.
Worked example (defaults): $100,000 invested, $30,000 in year 1 growing 5% a year, discounted at 10%. Simple payback is just over three years; discounted payback is longer.
Payback ignores cash flows after the payback point, so a project with large later returns can look worse than a quick but small one. Use it with NPV and IRR, which this calculator also reports.
What is a good payback period? Shorter is better; many firms want under three to five years.
What discount rate should I use? Your cost of capital or required return.
Can payback be fractional? Yes, assuming cash arrives evenly through the year.