The payback period is the time required for an investment to generate enough cash flow to recover its initial cost. It's a simple way to assess the risk of a project.
How to Use This Tool
Initial Investment: Enter the total upfront cost of the project.
Cash Flows: Enter the expected income (cash inflow) for each year.
Interpreting the Result
The result tells you how many years it will take to get your money back. A shorter payback period is generally preferred, as it indicates lower risk and faster liquidity.
The payback period ignores profitability after the initial cost is recovered and the time value of money. For a more complete profitability analysis, use the NPV Calculator or IRR Calculator.