Payback Time
Investments and payback time. Payback time is the number of periods required for cumulative benefits to equal cumulative costs. The smaller the payback period, the better the investment.
Payback Time Calculator
Payback time is the number of periods required for cumulative benefits to equal cumulative costs.
Undiscounted Payback
F₀ = F₁ + F₂ + ... + Fₙₚ
where:
- F₀ = initial investment
- F₁, F₂, etc. = cash flows in future periods
- nₚ = period where initial investment equals accumulated future cash flows
Discounted Payback
F₀ = F₁ / (1 + i) + F₂ / (1 + i)² + ... + Fₙₚ / (1 + i)ⁿₚ
where:
- i = interest rate (discount rate)