How to use the Payback Period Calculator
The payback period calculator shows how long an investment takes to earn back its cost.
Open the Payback Period Calculator →
What you need to enter
- Initial investment ($)
- Annual net cash flow ($)
- Annual cash-flow growth (%)
The formula
Payback = initial investment ÷ annual net cash flow, with an option for yearly growth in cash flow.
Worked example
Using the default values in the calculator:
- Initial investment ($): 50000
- Annual net cash flow ($): 12000
- Annual cash-flow growth (%): 0
| Payback period | 4.17 years |
| Months | 50 |
Tips for better results
- A shorter payback means lower risk but not necessarily higher profit.
- Use with NPV or IRR.
Common mistakes to avoid
- Ignoring cash flows after payback.
- Ignoring the time value of money.
Please note: Calculators and guides give general estimates, not financial, tax or investment advice. Real offers depend on your lender, location and personal situation. See our Disclaimer.