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Payback Period Calculator

Enter investment amount and annual cash flows to calculate simple payback period and discounted payback period.

Updated June 2026 · Editorial standards

Investment Details

$
$
$
Payback Period
3.3 yrs
Net Annual Cash Flow
$30,000
Discounted Payback
5.0 yrs

At $30,000/yr net cash flow, you recover your $100,000 investment in 3.3 years. Discounted payback (at 10%): 5.0 years.Payback period ignores time value of money. Use discounted payback for a more realistic view. Most companies target payback under 3–5 years. Shorter is better, but also consider total ROI and risk.

By the KalkWise Editorial Team Reviewed for accuracy Updated June 2026

What is the payback period calculator — simple & discounted?

In short

Payback period = initial investment ÷ net annual cash flow. A $100K investment returning $30K/year net has a 3.33-year payback. Most businesses target payback within 3–5 years. Discounted payback accounts for the time value of money.

Calculates simple payback period and discounted payback period for investment projects.

How to use this calculator

  1. 1Enter the initial investment (upfront cost).
  2. 2Enter annual cash inflow (revenue or savings generated).
  3. 3Enter annual cash outflow (ongoing operating costs).
  4. 4Enter discount rate for discounted payback calculation.

The formula

payback=initial investmentnet annual cash flow
net cash flow=inflow−outflow
Payback = I ÷ NCF; Discounted Payback: Find n where Σ NCF/(1+r)^n ≥ I
I
— Initial Investment
NCF
— Net Annual Cash Flow (inflow − outflow)
r
— Discount Rate

Worked example

The scenario

$100K investment, $40K annual inflow, $10K annual costs, 10% discount rate.

gives

The result

Net cash flow = $30K/yr. Simple payback = 3.3 years. Discounted payback ≈ 4.5 years.

Common use cases

  • Compare multiple investment opportunities.
  • Evaluate equipment purchases or capital expenditures.
  • Assess real estate investment recovery timelines.
  • Set minimum payback requirements for project approval.

Limitations & assumptions

  • Simple payback ignores cash flows beyond the payback period and time value of money.
  • Discounted payback still doesn't account for total profitability.
  • Use alongside IRR and NPV for a complete analysis.
  • Assumes constant annual cash flows (reality is often uneven).

Frequently asked questions

It depends on industry and risk. Technology investments often require 1–3 years. Manufacturing equipment 3–7 years. Real estate can be 7–15 years. Short payback reduces risk but may mean the project has a limited lifespan.

Disclaimer: KalkWise calculators are provided for general informational and educational purposes only and do not constitute financial, investment, tax, or legal advice. Results are estimates based on the figures you enter and the assumptions described above. Actual outcomes will vary. Consult a qualified professional before making financial decisions.