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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

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