Payback Period & Discounted Payback Period (DPP

Capital Budgeting: Simple Payback vs. Discounted Payback (DPP)

The Payback Period measures the time required for an investment to generate cash flows equal to its initial cash outlay.

Why Simple Payback Has Limitations

• Ignores the Time Value of Money: 10,000 received 5 years from now is treated identically to 10,000 received today.

• Ignores Post-Payback Cash Flows: A project with a 3-year payback that stops producing cash in Year 4 is ranked better than a project with a 4-year payback that generates millions for decades.

• Solution: Always combine Payback Period with Net Present Value (NPV) and Internal Rate of Return (IRR).

How to Use This Calculator

Enter your Initial Capital Investment / Project Cost () (e.g. 120000 (Equipment, software, solar, expansion)), Cash Flow Structure — select from Even Cash Inflows (Constant amount every year), Uneven Multi-Year Cash Inflows (Custom years 1-5), Annual Cash Inflow ( / year) [for Even mode] (e.g. 35000), Year 1 Cash Inflow () [for Uneven mode] (e.g. 25000), Year 2 Cash Inflow () [for Uneven mode] (e.g. 35000), Year 3 Cash Inflow () [for Uneven mode] (e.g. 45000), Year 4 Cash Inflow () [for Uneven mode] (e.g. 50000), Year 5 Cash Inflow () [for Uneven mode] (e.g. 55000), and Discount Rate / Cost of Capital (%) [for Discounted Payback] (e.g. 8.0 (WACC or Hurdle Rate)). Results update instantly — no submit button needed. Use metric or imperial units as labeled. For the most accurate result, measure height and weight in the morning without shoes.

The Formula

Capital budgeting payback period & discounted payback equations: Payback (Even Inflows) = (Initial Investment Cost) / (Annual Cash Inflow) Payback (Uneven Inflows) = A + (B) / (C) A = Last year with negative cumulative cash flow, B = Unrecovered cost at start of year, C = Cash flow in recovery year Cash Inflow (DCF_t) = (CF_t) / ((1 + r)^t) Payback Period (DPP) = Time t where Σ_t=1^n DCF_t = Initial Cost

Worked Example

For example, investing 120,000 into energy-efficient equipment generating 35,000/year in constant savings at an 8.0% discount rate: . When discounting at 8.0% (32,407 Yr 1, 30,007 Yr 2, 27,784 Yr 3, 25,726 Yr 4), the Discounted Payback Period (DPP) is 4.16 Years (50 Months), recovering 175,000 over 5 years.

Understanding Your Result

A normal menstrual cycle ranges from 21 to 35 days; the average is 28 days. Cycle length varies by up to 7–9 days between cycles in 20% of women without any pathology. Flow lasting 2–7 days is typical; more than 8 days (menorrhagia) or associated with soaking a pad/tampon hourly may warrant evaluation. Cycle irregularity (outside 21–35 day range) can indicate thyroid dysfunction, polycystic ovary syndrome (PCOS), or hypothalamic amenorrhea — a physician should evaluate persistent irregularity.