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Payback Analysis Calculator

Investment Recovery Period

Project Investment Payback Analysis
Calculates simple and discounted payback periods per AACE/GPSA standards. Includes NPV, IRR, MIRR, and profitability index with hyperbolic decline (Arps' b=0.5) for gas production and MACRS depreciation per IRS Pub 946.

Investment Parameters

$
$
% of CAPEX
AACE Class 3: 10-20%
% of CAPEX

Production & Revenue

$/year
Year 1 gross operating revenue
$/year
Year 1 OPEX (escalates with inflation)
% annual
Hyperbolic decline (b=0.5)
% annual
years

Financial Parameters

%
%
%
US federal corporate tax

📚 Learn the Theory

Comprehensive guide to simple and discounted payback periods, breakeven analysis, and investment criteria.

Read Engineering Guide →

Payback Formula

Payback = Initial Investment / Annual Net Cash Flow
Simple: Ignores time value of money
Discounted: Considers time value (NPV-based)
Hyperbolic: Arps' decline (b=0.5 for gas)

Investment Guidelines

  • <3 yr: Excellent - low commodity risk
  • 3-5 yr: Good - typical midstream target
  • 5-7 yr: Marginal - verify contracts
  • >7 yr: Requires strategic justification

Decision Criteria

  • NPV > 0 and IRR > WACC
  • PI > 1.2 for capital efficiency
  • MACRS accelerates tax shield
  • Hyperbolic b=0.5 standard for gas

Frequently Asked Questions

What is payback period analysis?

Payback period analysis calculates how long it takes for a gas processing investment to recover its initial cost through cumulative cash flows.

What is hyperbolic decline in payback analysis?

Hyperbolic decline models the gradual reduction in production or revenue over time, providing a more realistic payback estimate than assuming flat cash flows.

What metrics does this payback calculator include?

This calculator includes payback period, ROI, break-even analysis, MACRS depreciation, and IRR calculation for gas processing investments.

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