Payback period calculator

Simple payback ignores the time value of money. The discounted payback period (DPP) discounts each future cash flow to present value before measuring when cumulative discounted inflows recover the investment.

Discounted payback is always equal to or longer than simple payback because future dollars count for less today. Use your discount rate as a proxy for required return, WACC, or opportunity cost of capital.

For constant annual cash flows, this calculator applies the closed form when applicable; uneven or growing flows use the same cumulative interpolation as simple payback on discounted cash flows.

Use even annual cash flow when each year returns roughly the same amount (or grows steadily by a fixed dollar amount). Use uneven yearly cash flows when returns vary by year — ramp-up projects, maintenance years, or one-time spikes.

Optional annual increase or decrease in even mode models growing or declining returns without entering every year manually.

For uneven cash flows or when annual inflows change, use the cumulative cash flow method instead of a single division formula:

1. Start with −initial investment at year 0.
2. Add each year’s cash flow to build a cumulative cash flow column.
3. Find the last year cumulative cash flow is still negative.
4. Add the fraction of the next year needed to reach zero: Payback = Last negative year + (Remaining deficit ÷ Next year’s cash flow).

For discounted payback, discount each year’s cash flow first (CF ÷ (1 + rate)^year), then apply the same cumulative logic to discounted flows. The schedule table in this calculator shows both columns.

Even flows: Invest $100 at $20/year → simple payback 5 years. At a 10% discount rate, discounted payback ≈ 7.27 years.

Uneven rental example: $100,000 apartment with varying annual rent ($15k years 1–2, $24k years 3–4 and 6–8, $10k year 5) and a 5% discount rate → discounted payback ≈ 6.35 years (year 6 + $5,887 ÷ $17,056). Use uneven yearly cash flows mode above.

Payback period format: Results show whole years plus months when payback is fractional (e.g. 4 years 2 months), matching how finance teams report recovery time.

Payback period measures how long until cumulative cash inflows recover an upfront investment. Break-even is the sales volume where profit is zero on a per-unit basis — see our break-even calculator.

ROI and NPV/IRR measure total value created over the full life of a project, including cash flows after payback. For simple invested-vs-returned ROI %, use the ROI calculator. Payback is a quick risk screen, not a complete profitability test.

Scheduling software ROI on Ordio measures workforce savings in months — a different job from generic capital budgeting payback (dedicated EN shift-scheduling ROI tool on the roadmap).

• Ignores cash flows after payback (unless you use NPV/IRR — planned as separate tools).
• Simple payback ignores time value of money — use discounted payback when timing matters.
• Does not rank mutually exclusive projects with different sizes or risk.
• Not a substitute for tax, accounting, or securities advice.

• Mixing monthly and annual cash flows without converting periods.
• Using negative or zero cash flows without checking whether recovery is possible.
• Confusing payback with break-even point unit volume.
• Skipping a discount rate when comparing long-horizon projects.

For even annual cash flows in Excel, divide investment by annual cash flow: =A2/B2 where A2 is investment and B2 is annual inflow.

For uneven flows, build a cumulative cash flow column starting at =-Investment, then add each year’s inflow. Interpolate when cumulative crosses zero — or export the schedule from this calculator.

Discounted payback in Excel: add a present-value column =CashFlow/(1+rate)^year, cumulative sum discounted flows, then interpolate at the crossover — same logic as the cumulative cash flow method.

Monthly payback in Excel: convert all flows to monthly periods (÷12 for annual) or use monthly rows; this calculator uses annual periods in v1 — multiply fractional years by 12 for months.