Payback Period Calculator — What It Is

The payback period is the time required to recover the initial investment. Shorter payback periods generally indicate lower risk investments.

Simple vs Discounted Payback

• Simple payback ignores time value of money
• Discounted payback includes discount rate

When to Use

• Equipment purchase decisions
• Startup investments
• Project evaluation

Limitations

• Ignores long-term profits
• Doesn’t measure ROI
• Doesn’t measure NPV