Payback: drag the annual cash
Drag the annual cash. The outlay is held still, so payback moves only because the yearly receipt does. A fatter year is an earlier date. What arrives after that date is not in the number.
Payback
3.33 years
Cash that year
$18,000.00
Five equal years. Raise the cash and the date moves in. What arrives after that date is not in the number. Illustrative arithmetic, not a project decision or advice.
Outlay
$60,000.00, held still.
In short
- Drag the bar right for more cash each year and an earlier payback.
- Drag it left for a thinner year and a later date.
- Watch the date pass five years when the cash cannot cover the outlay in time.
- Focus the handle and use the arrow keys to step the cash.
A date, not a profit
Payback stops when the running total equals the cost. How payback period works is the formula. The payback period calculator is the table. Discounted against plain payback prices the waiting and still ignores the tail.
NPV counts the years payback drops
Net present value prices every year, including the ones after the cutoff. How NPV and IRR work is that test. Payback against NPV is the pair.
Cash, not profit
The count runs on cash. A cash flow that leaves the bank counts on the day it leaves.
Common questions
Why does a later year of cash not help?
Because payback has already stopped. That is the whole of the first blind spot.
Is a shorter payback a better project?
It is a project whose money is exposed for less time. It is not a ranking by value.
Is this a buy decision?
No. It is a running total on a teaching sheet. It is educational material, not advice.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.