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Payback Period
Years
Calculation Principles & Formulas
The Payback Period is the length of time required to recover the cost of an investment. It is one of the simplest methods for assessing liquidity and risk. A shorter payback period means faster capital recovery and generally lower investment risk.
[Formula]
Payback Period = Initial Investment / Annual Cash Inflow
Where:
Initial Investment = Total capital invested at the start
Annual Cash Inflow = Net cash inflow generated each year (assumed constant)
Note: This calculator assumes equal annual cash flows. For uneven cash flows, the cumulative cash flow method is required.
