Payback Period Calculator (Investment ÷ Annual Cash In)
Simple payback asks how long until cash in equals cash out: years = investment ÷ annual net cash in. It ignores the time value of money, so a dollar in year 5 counts the same as a dollar in year 1. That is why finance courses pair payback with NPV. This page is the simple version only — no discount rate, no NPV.
Simple payback (years)4
Simple payback (months)48
How this calculation works
Years = initial investment / annual cash in. Months = years × 12.
Annual cash in should be net operating cash attributable to the project (profit + non-cash charges, or the cash you actually pocket). Type your number; the tool does not build a P&L.
Uneven yearly cash flows are not modeled. If year 1 is 10 and year 2 is 40, this average method misleads — use a cumulative spreadsheet.
Discounted payback and NPV need a discount rate and a cash-flow schedule. They are intentionally omitted here. Link ROI and break-even for related simple metrics.
Worked example
Invest 100,000, earn 25,000 a year net → 4.00 years (48 months). Invest 9,000 with 4,000 a year → 2.25 years.
Frequently asked questions
Why do textbooks say payback is flawed?
Because it ignores interest rates and cash after the cutoff. A project that pays back in 3 years and then earns nothing can beat a project that pays back in 4 and then earns for decades — on payback alone.
Is this discounted payback?
No. Discounted payback divides discounted cash, not raw cash. NPV is not on this page.
Pre-tax or after-tax cash?
Use the cash definition your decision needs. Mixing them makes the years meaningless.
Salvage value?
Not in the formula. You can subtract expected salvage from the investment if you will recover it at the end — that is a different, still-simple, sketch.
How does this relate to cap rate?
For a property, value/NOI is a simple payback in years (the inverse cap rate) if NOI is constant. See the cap-rate calculator.