Discounted Payback Period Calculator
The discounted payback period is how long it takes for a project's discounted cash flows to repay the initial investment. By discounting each cash flow to present value before accumulating, it respects the time value of money, unlike the simple payback period. Enter the initial investment, the periodic cash flows, and the discount rate. The calculator returns the discounted payback period in periods, including the fractional part of the final period.
Discounted payback formula
Discounted CF_t = CF_t / (1 + r)^t
Accumulate discounted CF until cumulative >= initial investment
Payback = full periods + (unrecovered at start of final period / discounted CF in that period)
Cash flows are periods 1, 2, 3 and so on. The discount rate is per period and entered as a percentage. If the cumulative discounted cash flow never reaches the investment, the project does not pay back over the horizon entered.
Worked example
Investment $100,000; cash flows 30,000, 40,000, 50,000, 20,000; 10 percent per period:
- Discounted: 27,272.73; 33,057.85; 37,565.74; 13,660.27.
- Cumulative after 3 periods = 97,896.32 (still 2,103.68 short).
- Payback = 3 + 2,103.68 / 13,660.27 = 3.15 periods.
Discounted payback: frequently asked questions
What is the discounted payback period?
The discounted payback period is the time it takes for a project's discounted cash flows to recover the initial investment. Unlike the simple payback period, it discounts each future cash flow to its present value first, so it accounts for the time value of money. It is always at least as long as the simple payback period.
How is the fractional period found?
Cumulative discounted cash flow is tracked period by period. The payback occurs in the period where the cumulative total first turns positive. The fraction within that period is the still-unrecovered amount at the start of the period divided by that period's discounted cash flow, added to the count of fully completed periods.
What if the investment is never recovered?
If the sum of all discounted cash flows never reaches the initial investment, there is no discounted payback period within the cash flows you entered. The calculator reports that the project does not pay back over the horizon provided. Adding more periods of cash flow, if realistic, may change this.
Why prefer discounted payback over simple payback?
Simple payback ignores that a dollar received later is worth less than a dollar today. Discounted payback corrects this by using present values, giving a more economically meaningful measure of how long your capital is at risk. It still ignores cash flows after payback, so it is best used alongside net present value.
Official sources
- U.S. Securities and Exchange Commission, Investor.gov: Present Value.
- U.S. Securities and Exchange Commission, Investor.gov: Compound Interest Calculator.
Reviewed by the CalculatorHub team, edited by James Graham, 19 June 2026. See our methodology.