Work out discounted payback period instantly with clear inputs, formula shown and shareable results.
Discounted payback asks how long until cumulative discounted cash flows repay the investment. It is always longer than simple payback, and if it exceeds the project life the project never recovers its cost at that discount rate — a useful screen before a full NPV analysis.
Discounted cash flow
DCF_t = Annual cash flow / (1 + r)^t
Discounted payback
The year in which cumulative DCF first equals the initial investment, interpolated within the year
Because it respects the time value of money. Simple payback treats a cash flow in year eight as equal to one in year one.
No. Payback ignores everything after the cut-off. Use it as a liquidity and risk screen alongside NPV, not instead of it.