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cumulative cash flow → zero

Payback period calculator

Enter the investment followed by its inflows. The page reports the period in which the cumulative cash flow turns positive, plus the position at every step.

Commas or spaces. The first value is usually the negative investment.

Short answer: ₹5,00,000 invested with ₹1,80,000 a year comes back in 2.78 periods — two full years plus 0.78 of the third, which is about 2 years 9 months.

Reading the cumulative row

Payback is found by watching the running total. It is negative while the investment is outstanding and turns positive in the period that clears it; the fraction inside that period is the outstanding balance divided by the inflow.

Worked example

A ₹2,00,000 machine saves ₹80,000 a year. After two years ₹40,000 is still outstanding, and 40,000 ÷ 80,000 = 0.5, so payback is 2.5 years. The same figures give an NPV that depends on the discount rate, which is what payback cannot tell you.

Payback questions

What is the payback period?

The time until the cumulative cash flow turns positive — how long the investment takes to pay for itself. It is the simplest appraisal test and the only one that ignores what happens after the money is recovered.

How is the fraction inside a year calculated?

Whatever is still outstanding at the start of the recovering period is divided by that period’s inflow. ₹2,00,000 outstanding with a ₹4,00,000 inflow means half the period, so a payback of 2.5 periods.

What is the weakness of payback?

It ignores the time value of money and everything after the payback point. A project that repays in two years and then earns nothing scores better than one that repays in three and earns for a decade. Use it alongside NPV, not instead of it.

Related tools

NPV and IRR calculatorThe tests that do account for the discount rate.Break-even calculatorThe volume that covers fixed costs.CAGR calculatorAnnualised growth between two values.