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ROI & Payback Period Calculator

Evaluate capital investments with uneven cash flows. Calculates ROI, Payback Period, and visualizes the Break-even Point. Essential for CAPEX and business case analysis.

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Category Business & Trade
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Year 1
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Year 2
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Year 3
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Year 4
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Year 5
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About

Allocating capital efficiently distinguishes profitable businesses from stagnant ones. This tool evaluates the financial viability of an investment by analyzing the Payback Period and Return on Investment (ROI). Unlike basic calculators that assume constant income, this utility handles Uneven Cash Flows, allowing for precise modeling of ramp-up periods where Year 1 returns may differ significantly from Year 5. It identifies the exact point in time when the initial outlay is recovered, often referred to as the Break-even Point, and provides a clear visualization of the J-curve effect inherent in capital expenditures.

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Formulas

The Payback Period is calculated using an iterative summation of cash flows. If the initial investment is I0 and cash flows are C1, C2... Cn:

Cumulativet = −I0 + t∑i=1 Ci

The Payback Period is found where Cumulativet changes from negative to positive. Fractional years are interpolated assuming linear cash flow distribution within the year.

Reference Data

MetricFormulaInterpretation
ROI (%)NetProfitCost × 100The efficiency of the investment. Positive is profitable.
Payback PeriodY + |CFunrec|CFnextTime required to recover the initial cost. Y is the last negative year.
NPV (approx)n∑t=1 Ct(1 + r)tNet Present Value (assuming r discount rate).
Break-evenRevenue - Costs = 0The moment cumulative cash flow turns positive.

Frequently Asked Questions

The calculator will report "Not Recovered" within the specified timeframe. This indicates a high-risk investment or a period too short for the project's scale.
Yes. Some projects require maintenance injections (negative cash flow) in later years. The algorithm sums these correctly to determine the true cumulative position.
This specific tool calculates the "Simple Payback Period" and nominal ROI. It does not apply a discount rate (WACC) to future cash flows. For that, use a Net Present Value (NPV) calculator.
In business contexts, "2 years" is vague. "2.4 years" (approx. 2 years and 5 months) provides a specific timeline for liquidity planning.