Payback Period Calculator
Divide the investment by the net cash it brings in each month. Put in 20,000,000 and clear 500,000 a month and you are level again in 40 months — about three years and four months. Invert that and you have the simple annual return: twelve over forty is 30%.
Your numbers
Payback period
40mo
Years
3.33yr
Return
30%
Formula
Payback period = Invested ÷ Net cash a month
This ignores the time value of money: 500,000 arriving three years out counts the same as 500,000 this month, which flatters long paybacks. Past two or three years, check it again with the present-value page. Nor does it say anything about how much the asset earns after it has paid for itself.
What to enter
| Input | Default | Accepted range |
|---|---|---|
| InvestedEverything you put in; include fees or the return comes out flattering. | 20,000,000 | 0 and up |
| Net cash a monthCash in minus cash out each month; depreciation is not deducted. | 500,000 | 0 and up |
Step by step
Quick reference table
Results when only Invested changes and everything else stays put.
| Invested | Payback period (mo) | Years (yr) | Return (%) |
|---|---|---|---|
| 10,000,000 | 20 | 1.67 | 60 |
| 15,000,000 | 30 | 2.5 | 40 |
| 20,000,000 | 40 | 3.33 | 30 |
| 30,000,000 | 60 | 5 | 20 |
| 40,000,000 | 80 | 6.67 | 15 |
What each result means
| Result | At default values |
|---|---|
| Payback period (mo)Months until the investment is back, ignoring the time value of money. | 40 |
| Years (yr)How many years the money stays put; compounding bites harder as this grows. | 3.33 |
| Return (%)How much you made relative to what you put in. | 30 |
Common mistakes
This ignores the time value of money: 500,000 arriving three years out counts the same as 500,000 this month, which flatters long paybacks. Past two or three years, check it again with the present-value page. Nor does it say anything about how much the asset earns after it has paid for itself.
Glossary
- Invested
- Everything you put in; include fees or the return comes out flattering.
- Net cash a month
- Cash in minus cash out each month; depreciation is not deducted.
- Payback period
- Months until the investment is back, ignoring the time value of money.
- Years
- How many years the money stays put; compounding bites harder as this grows.
- Return
- How much you made relative to what you put in.
Frequently asked questions
Q. How is Payback Period Calculator calculated?
Payback period = Invested ÷ Net cash a month — Divide the investment by the net cash it brings in each month. Put in 20,000,000 and clear 500,000 a month and you are level again in 40 months — about three years and four months. Invert that and you have the simple annual return: twelve over forty is 30%.
Q. Can you walk through an example?
With Invested 20,000,000, Net cash a month 500,000, the answer is Payback period 40mo.
Q. What do I need to enter?
Enter Invested, Net cash a month. The result recalculates as you type, and an empty box counts as zero.
Q. How much does the answer move if I change a number?
Changing only Invested moves the answer to Invested 10,000,000 → Payback period (mo) 20 and Invested 40,000,000 → Payback period (mo) 80. The table below lays out five steps.
Q. How are the numbers rounded?
Money is shown to the nearest whole unit, percentages to one decimal place and everything else to two. What you see is rounded; the calculation itself carries the unrounded value forward.
Q. Anything to watch out for?
This ignores the time value of money: 500,000 arriving three years out counts the same as 500,000 this month, which flatters long paybacks. Past two or three years, check it again with the present-value page. Nor does it say anything about how much the asset earns after it has paid for itself.
Related calculators
Tax rates and interest conventions differ by country and product — check your contract for real transactions.