Corporate finance
Discounted Payback Period Calculator
Discount each annual cash flow before estimating recovery time.
Results
Enter values and press Calculate to see an explanation.
Result interpretation
Discounted payback includes time value and is usually longer than simple payback, but still ignores later flows.
Read the learning guide →FORMULA
Formula
Discount annual flows first, then interpolate within the first recovery year.
Variables and limits
CFₜ is the year-end cash flow, r a constant annual discount rate, and t starts at 1. Fractional recovery interpolates within a year's discounted flow; exact payment timing, variable rates, and post-recovery flows are outside the metric.
WORKED EXAMPLE
Example
- Enter initial investment 1,000, two annual flows of 600, and a 10% discount rate.
- Discounted flows are 600/1.1 ≈ 545.45 and 600/1.1² ≈ 495.87.
- Payback is 1 + (1,000−545.45)/495.87 ≈ 1.92 years.
Frequently asked questions
What happens at a zero discount rate?
Each discount factor is one, so it equals simple payback.
What if discounted flows never recover the outlay?
It shows not recovered instead of a made-up year; extend the forecast or inspect total value with NPV.
Can this replace NPV?
No. Discounted payback still ignores flows after recovery, while NPV includes the full forecast.