Calculate the simple and discounted payback period of an investment from its cash flows.
The payback period answers one question: how long until the money comes back? The simple version adds the cash flows until they equal the investment, ignoring time value entirely. The discounted version does the same but first shrinks each flow to its present value at the rate you choose. A project with a four-year simple payback can easily have a six-year discounted payback when money is expensive.
Payback is popular because it is easy to explain: shorter is better, and anything beyond a threshold the company sets is rejected. But it ignores everything that happens after the payback point, which means it can reject a project that earns spectacularly in year five in favour of one that earns modestly in year two. That is why finance textbooks pair it with NPV and IRR rather than using it alone.
Both versions are calculated here as fractional periods rather than rounding to the next whole one. If the cumulative flow crosses the investment midway through period four, the result says 3.6 rather than 4. Everything runs in your browser: the investment, the flows and the result never leave your device.
Simple payback = last full period before recovery + (remaining amount / next period cash flow). Discounted payback = same, but each cash flow is first divided by (1 + rate)^period.
Your minimum acceptable return — often the weighted average cost of capital (WACC) or the opportunity cost of the best alternative investment.
The cash flows you entered are not enough to recover the investment, even if you waited forever. Either the project does not pay for itself or you need to add more periods.
Not necessarily. Payback ignores everything after the recovery point. A project that pays back in one year but earns nothing afterwards is worse than one that takes three years and then earns for twenty.
No. All calculations run in JavaScript on your device. Nothing is stored or transmitted.
The simple version treats a real received in five years as worth the same as one received today. The discounted version acknowledges that money now is worth more than money later, so it takes longer to "pay back" in real terms.
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