Discounted payback period calculation

Written by:Abraham A.
Location:DCF Analysis

Finance.ThinkAndDone.com provides you online financial calculation tool that let's you perform discounted payback period calculation from a series of cash flows and the discount rate. Discounted payback period method is used to find the time period required to recover the initial costs incurred in undertaking a capital budgeting project. An organization lays out a target time period in which it expects to recover the costs; a projoect is accepted or approved when the actual discounted payback period calculated from future cash flows is less than the target payback period.

Location: DCF Analysis

Discounted payback period Calculation

Developed by:Emma A.
Location:Financial Calculations
type in the authorization code in the box located below:

Results

N CF PVIF CF x PVIF DCF Cumulative DCF
0 -100000 1/1.050 -100000 x 1 -100000 -100000
1 35000 1/1.051 35000 x 0.95238 33333.33 -66666.67
2 35000 1/1.052 35000 x 0.90703 31746.03 -34920.64
3 35000 1/1.053 35000 x 0.86384 30234.32 -4686.32
4 35000 1/1.054 35000 x 0.8227 28794.59 24108.27
5 35000 1/1.055 35000 x 0.78353 27423.42 51531.69
6 -10000 1/1.056 -10000 x 0.74622 -7462.15 44069.54
Discounted payback period formula

Year before recovery = 3
Remaining Years = ( 28794.5866177 - 24108.2676457 ) / 28794.5866177
Remaining Years = 0.16275
 

Payback Period = 3.16 years.

Input Data

Please enter the discount rate:  
Please enter the net cash flows in the space below:

Instructions

To perform discounted payback period calculation with this online tool, you need to type in series of net cash flows along with the discount rate. Assume you are analyzine a project with these series of cash flows -100000 35000 35000 35000 35000 35000 -10000 and the company's expected rate of return is 5%. Follow the steps outlined below to find discounted payback period with this online tool

  • At first type in the series of cash flows each separated by a space in the text box on calculator screen. -100000 35000 35000 35000 35000 35000 -10000
  • Then type in 5 as the discount rate
  • Finally clicking on CALCULATE button will display detailed step by step workout for discounted payback period calculation