Finance

Payback Period Calculator

Find how long an investment takes to pay back.

Calculated Output

Payback period (years) 4.167

Payback period (months) 50

Formula: years = investment ÷ annual cash flow

Step-by-Step Breakdown

1. Values used:

2. Initial investment = 50,000 $

3. Annual cash flow = 12,000 $

5. Payback period = Initial investment / Annual cash flow = 50,000 / 12,000 = 4.167years

6. Payback period = 50months

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The math behind it

payback period = initial investment ÷ annual cash flow (for steady flows).

$50k ÷ $12k → 4.17 years.

Limitation?

It ignores the time value of money and cash flows after payback.