Payback and Discounted Payback

This calculator shows how many years it takes to recover your initial investment.

Payback uses undiscounted cash flows. Discounted payback uses the same discount rate as NPV to find when the project’s present value has “paid back” the initial cost. Pairs with the NPV/IRR calculator.

Shorter payback means faster recovery. Discounted payback is always longer than (or equal to) payback because it values later cash less.

Key idea Payback = years until cumulative cash flow covers the initial investment. Discounted payback = years until cumulative present value covers the initial investment.

Step 1 – Enter your numbers

Use the same inputs as in the NPV/IRR calculator: initial investment (negative), discount rate, and cash flows by year.

Step 2 – See results

Payback period

Years to recover the initial investment (undiscounted cash flows).

Discounted payback period

Years to recover the initial investment using present values at your discount rate.

Cumulative cash flow and present value

Year	Cash flow	Cumulative	Present value	Cumulative PV

Example (same as NPV/IRR)

Initial investment ¥500,000; cash flows ¥200,000 per year for 3 years; discount rate 8%. Payback = 2.5 years (500/200). Discounted payback is longer because later cash is worth less in today’s terms.

Key words

Payback period: Time in years until the sum of (undiscounted) cash flows equals or exceeds the initial investment.
Discounted payback: Time in years until the sum of present values of cash flows equals or exceeds the initial investment. Uses the same discount rate as NPV.