Result
Payback period
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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
Simple payback period = investment amount ÷ annual cash flow. The calculation assumes the cash flow is the same every year — if the flow varies by year, it's more accurate to compute it cumulatively: sum the flow year by year until the total matches the investment.
This is a simple, non-discounted period — it doesn't account for money received in 5 years being worth less than money received today. For a period that accounts for the time value of money, use the discounted payback period, and for a full project evaluation, use NPV and IRR.
The payback metric says nothing about what happens to the cash after the investment is recovered — a project with a shorter payback period isn't always better than one with a longer payback but a higher overall return.