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How to use Payback Period Calculator

Enter the initial investment and each year's cash inflow. The calculator adds them until the cost is recovered and shows the payback period in years and months.

Frequently asked questions

What is the payback period?

It is the time needed for cumulative cash inflows to equal the initial investment. A shorter payback means you recover your money faster with less risk.

How is the payback period calculated?

Cash inflows are added year by year until they reach the initial cost. The fractional final year is prorated to express the answer in years and months.

What is the drawback of the payback method?

Payback ignores the time value of money and any cash flows after recovery, so pair it with NPV or IRR for a complete view of a project's profitability.

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