Payback Period Calculator
A cash constraint, not a ranking method.
Payback period
8 months
7.5 months at a flat return
Payback period ignores everything that happens after the investment is recovered, which is why it favours short projects over valuable ones. Use it as a cash flow constraint, not as a ranking method.
How the Payback Period Calculator works
Payback period ignores everything that happens after the investment is recovered, which is why it favours short projects over valuable ones. It is a useful cash flow constraint and a poor way to rank opportunities.
Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price — check the platform's current fee schedule before you price a product against it. This is not tax or business advice.
Frequently asked questions
How is payback period calculated?
Accumulate net returns until they cover the investment. With a flat return it is simply investment divided by monthly return; with a growing return it has to be accumulated period by period.
Why is it a poor ranking method?
Because it stops counting at break-even. A project paying back in two years and then earning for a decade ranks below one paying back in one year and then stopping.
When is it the right tool?
When cash is the binding constraint. If you cannot survive a long payback, the fact that a project is eventually more valuable does not help.
What should I use instead for ranking?
Net present value or internal rate of return, both of which count the whole life of the investment. Use payback alongside them as a liquidity check.