Payback period (years)
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Payback Period Calculator
Undiscounted payback period from your initial outlay (CF0) and three years of cash inflows. Shows the fractional year you cross break-even, not a 3-year NPV.
Page updated 2026-09-14.
Calculator
Calculated Results
Cumulative cash after year 3
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Payback period answers "when do I get my money back"
Payback period is the simplest capital budgeting check: how many years of cash inflows does it take to recover an initial investment, with no discounting. It is popular precisely because it is easy to explain to a non-finance stakeholder, even though it ignores what happens after the payback point and ignores the time value of money.
On the defaults, a $10,000 outlay returns $4,000 a year. After year 1 you are down $6,000, after year 2 down $2,000, and $2,000 of the $4,000 in year 3 finishes the job -- so payback lands at 2.50 years.
Where this differs from a discounted analysis
Because payback period does not discount future cash, a project with fast-but-small returns can look better than a project with slower-but-larger total returns, even when the second project actually creates more value. Pair this with the Net Present Value (NPV) Calculator or Internal Rate of Return (IRR) Calculator before making a real capital allocation call.
Terminal value and WACC feed the same kind of decision from a different angle -- see the Terminal Value Calculator and WACC Calculator.
Frequently Asked Questions (FAQ)
How is payback period calculated here?
Starting from CF0 (a negative number, the amount you invest), each year's cash inflow is added to a running total. Payback period is the point that running total crosses zero, including the fractional part of the year it happens in. Defaults: -$10,000 CF0, $4,000 in each of years 1-3, so cumulative cash is -$6,000, -$2,000, then +$2,000 in year 3. Payback lands 0.5 of the way through year 3, giving 2.50 years.
Why is this not the same as NPV?
NPV discounts every cash flow to today's dollars and sums them; payback period ignores the time value of money and just asks how long until you get your money back. They answer different questions and can disagree on which project looks better. Use the Net Present Value calculator when you need a discounted figure.
What if the investment is never recovered?
If cumulative cash is still negative after CF1, CF2, and CF3, the payback period result is blank (shown as --) rather than a fabricated number, and the cumulative cash figure shows exactly how far short you are.
Why must CF0 be negative?
CF0 represents the money you put in up front. Payback period is undefined if there is nothing to recover, so the calculator requires CF0 below 0 and treats CF1-CF3 as the inflows that pay it back.
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