Calculate the payback period from annual savings
Enter the investment and the annual savings to find the simple payback period. The result shows the number of years under the chosen assumptions.
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Worked example
- Investment: 40,000.00 GBP
- Annual savings: 5,000.00 GBP/year
Result
Payback period
8 years
Working
- years = investment / annual savings
40,000.00 GBP / 5,000.00 GBP/year = 8 years
What does the simple payback period show?
The simple payback period describes how long a fixed annual saving must run before it adds up to the investment. The calculation can be used as a first overview of an improvement where both the cost and the annual saving are known.
Enter the investment and the savings per year. If there is no documented or calculated basis for the savings, the annual savings are unknown. The calculator does not estimate them from a particular type of improvement.
How the payback period is calculated
The investment is divided by the annual savings. The calculation does not take interest, price increases or maintenance into account. It therefore assumes that the savings you enter are the same every year.
The result also does not show how long the solution lasts. If the savings are zero, no payback period can be found with this division. Use the result together with the specific details of the investment and how it is expected to perform.
Example with investment and savings
The page's example uses an investment of 40,000 and annual savings of 5,000. The payback period is 40,000 / 5,000 = 8 years. The check is 8 × 5,000 = 40,000 in total savings under the example's fixed assumptions.