Simple Payback Calculator

How simple payback works

Simple payback is how long it takes for cumulative cash inflows to catch up with the initial investment, with no adjustment for the time value of money. When the flows are constant: Payback = I₀ / annual cash flow. When they vary, you add them up period by period and interpolate linearly across the partial period. Put in R$ 1,000 and take back R$ 300, R$ 400, R$ 400 and you land near 2.75 periods (after period 2 you're still R$ 300 short of the R$ 400 expected in period 3 → 0.75 of the period).

People like the metric because it answers a gut-level question (when does my money come back?) and flags liquidity risk along the way. The blind spot is just as well known. It ignores everything that happens after the payback date, and it treats a real today as worth the same as a real five years out. On long-horizon projects, pair it with NPV/IRR or switch to the discounted payback.

Where it is used

SMB capex, equipment replacement, energy efficiency retrofits (LED, solar PV, insulation), credit analysis where BNDES PEAC and Caixa programs require payback inside a maximum window, and early-stage startups sizing up growth bets. Plenty of manufacturers and franchises advertise the "payback in N months" line as a selling point.

FAQ

What payback is "good"? It depends on the industry. Energy retrofits run 3–7 years; SaaS CAC payback comes in under 12 months; restaurant franchises sit at 24–36 months; rooftop solar PV in Brazil usually takes 4–7 years.

Why does my project show a payback but a negative NPV? Simple payback skips discounting entirely. Money far out in the future is worth less today, so a positive cumulative cash position still doesn't prove the project beats your cost of capital.

Can payback be longer than the project life? It can, and when it is, the project never breaks even in nominal terms. Reject it outright unless strategic or regulatory reasons push you to invest anyway.