Investment
Cash flow
Horizon
Result
Simple payback
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Above zero means the purchase beats keeping the money at the discount rate
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Monthly cash flow = revenue − variable costs − fixed costs. Depreciation is deliberately left out: it is an accounting figure rather than a movement of money, and it only gets in the way of «when do I get my money back».
Simple payback = investment ÷ monthly cash flow. It ignores the fact that a dollar today is worth more than a dollar next year, so it always looks more optimistic than reality.
Discounted payback accounts for the cost of money: each monthly flow is divided by (1 + monthly rate) raised to the month number, where the monthly rate is the annual rate ÷ 12. The period comes out longer — and that is the honest one.
NPV is the sum of discounted flows over the service life minus the investment, plus the present value of the resale amount. A positive NPV means the purchase beats the alternative at the same rate. IRR is the rate at which NPV hits zero: compare it with your loan rate to see whether buying on credit makes sense.