How to use and examples
3 steps
- Enter initial investment and periodic cash flows.
- Set a discount rate if you want discounted payback.
- Review simple payback, discounted payback, and cumulative chart/table.
Input examples
- Example 1: 10,000,000 initial, 3,000,000 for five periods, discount rate 8%.
- Example 2: Include a negative reinvestment period in the middle and compare recovery timing.
Payback is a speed metric. Use with NPV/IRR for complete decision-making.
Inputs
Results
Cumulative chart
Period table
| Period | Cash flow | Cumulative | Discounted cash flow | Discounted cumulative |
|---|
How it’s calculated
- Simple payback: first period where cumulative cash flow reaches zero or above.
- Discounted payback: first period where cumulative discounted cash flow reaches zero or above.
- Discount rate is always interpreted as annual rate; monthly mode converts annual rate to monthly rate automatically.
- When crossing happens within a period, linear interpolation is applied.
- If cumulative total never crosses zero, the tool reports no payback in range.
- Payback highlights recovery speed but not full value creation after payback, so use NPV/IRR alongside it.
FAQ
Simple vs discounted payback?
Discounted payback applies a discount rate to future cash flows, so recovery typically appears later than simple payback.
What if there is an extra investment later?
Add a negative cash flow in that period. The table and chart will reflect delayed recovery.
How do I choose discount rate?
Use your hurdle rate, required return, or weighted average cost of capital assumption.
Is payback enough for project decisions?
No. Use NPV/IRR with payback to evaluate value creation and risk.
How is discount rate handled in monthly mode?
The entered discount rate is treated as annual rate and automatically converted to monthly rate for monthly calculations.