How we worked it out
Updated as you change the numbers.
- Subtract each year’s inflow from the remaining cost; in the year the remainder is covered, add the fraction of that year needed.
- Discounted payback does the same with each inflow divided by (1 + rate)^year.
Method and assumptions
The payback period is how long the cumulative cash inflows take to equal the investment, assuming cash arrives evenly through each year. It ignores cash after the payback point, so use it alongside NPV or IRR.
Questions
What is the payback period of $50,000 earning $12,000 then $15,000 a year?
3.44 years: $42,000 after three years, then $8,000 of the next $18,000.
Sources
Method and figures checked on . Every worked answer on this page is covered by an automated test. Found a mistake? Tell us.