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Payback Analysis Calculator

Investment Recovery Period

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Simple Payback Calculator
Determines simple and discounted payback periods for capital investments. Calculates time to recover initial investment from annual cash flows for quick project screening and ranking.

Investment Parameters

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

Production & Revenue

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

Financial Parameters

%
%
%
US federal corporate tax

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)
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Investment Guidelines

  • Target payback: 3-5 years for gas projects
  • Shorter payback = lower risk
  • Discounted payback more accurate
  • Consider project life vs payback
  • Factor in uncertainty and risk
  • Compare with industry benchmarks
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