📈 Metrics

Payback period

How long until an investment earns back what it cost.

Formula

Payback = Upfront investment ÷ Annual cash return

Payback period measures time to recover the money you put in.

It's simple and intuitive, which is why executives love it — but it ignores what happens after payback.

🧮 Example

A ₹50 lakh machine saves ₹20 lakh a year → payback = 2.5 years.

🎯 Interview tip

Pair payback with ROI or NPV when the project runs for many years.

Used in

Consulting casesOperations casesM&A cases

Learn next

Return on investment (ROI)

How much you gained for every rupee you invested.

Break-even point

How much you must sell before you stop losing money.

Net present value (NPV)

Future cash, translated into today's money.

The Case Flex weekly

One concept. One case breakdown. One practice prompt. Every week, in simple words.

Practise Payback period in a real case

An AI interviewer runs you through a case, pushes back, and scores your reasoning. Free to start.

Try a free case