Discounted Payback Period Calculator
How long an investment takes to pay for itself once future money is discounted, next to the plain payback for comparison.
Results
What this tool does
"How long until I get my money back" is the first question anyone asks about an investment, and the usual answer quietly pretends that a euro five years from now is worth a euro today. This page does not. It discounts every incoming flow before counting it, so the recovery point lands where it actually lands — later, and more so the higher the rate. You get both figures side by side, the year-by-year table behind them, and the net present value at the end, which is the same information stated as money rather than as time.
Formula
flow_t ÷ (1+r)^t is accumulated until it covers the investment ; the fraction of the last period comes from interpolation
Variables
| Symbol | Meaning | Unit |
|---|---|---|
initial | Initial investment | — |
flows | The cash flows, in order | — |
rate | Discount rate | % |
DP | Discounted payback | — |
SP | Payback ignoring the discount | — |
DL | How much later than the simple one | — |
RC | Does it ever pay back? | — |
TB | Period · flow · discounted · still to recover | — |
NV | Net present value | — |
TD | All the flows, discounted | — |
TL | All the flows, undiscounted | — |
NP | Periods | — |
Worked example
- Initial investment50,000
- The cash flows, in order14000, 14000, 14000, 14000, 14000
- Discount rate8 %
- Discounted payback4.3810
- Payback ignoring the discount3.5714
- How much later than the simple one0.8096
- Does it ever pay back?Yes
- Period · flow · discounted · still to recover1 14000 12962.96 -37037.04 2 14000 12002.74 -25034.29 3 14000 11113.65 -13920.64 4 14000 10290.42 -3630.22 5 14000 9528.16 5897.94
- Net present value5897.94
- All the flows, discounted55,897.94
- All the flows, undiscounted70,000.00
- Periods5
Limitations
- This is an informational calculator, not personalised financial advice. Rates, fees, taxes and contract conditions vary between institutions and countries.
- The tool works with whatever currency you use for the inputs; it does not convert between currencies.
Frequently asked questions
Why bother discounting the payback?
Because the plain payback period treats a euro in year five as identical to a euro today, which is the one assumption every other tool in finance rejects. On a 1,000 investment returning 400 a year, the plain answer is two and a half years; discount at ten per cent and it is just over three. The gap is the cost of waiting, and it grows with the rate and the length of the project. The plain figure is not wrong so much as incomplete — this page shows both so the difference is visible.
It says the investment never pays back — what does that mean?
That within the flows you listed, the discounted total never reaches the amount you put in. It does not mean the project is worthless — it may pay back in year eight, and you only listed five. Add the remaining years and look again. If you did list the whole life of the project and it still does not recover, the net present value will be negative too, and the two figures are saying the same thing in different units.