Savings Project Simple Payback Calculator

How the savings project simple payback calculator works

Annual net operating saving = entered annual gross saving minus added annual operating cost. Each entered money amount rounds half-up to cents before the model combines it. These are your assumptions; the calculator does not verify or forecast the savings.

Simple payback = upfront project cost ÷ positive annual net saving. If net annual saving is zero or negative, payback is undefined and is left blank. A zero upfront cost with positive net annual saving has zero simple payback.

Undiscounted cumulative net at the selected whole year end = annual net saving × years − upfront cost. Year zero therefore shows the upfront outflow. Savings are treated as a constant annual amount; the model does not infer monthly or dated cash flow.

Simple payback is a screening calculation, not net present value, rate of return or an investment recommendation. Taxes, financing, discount rates, escalation, replacement cycles, asset life and residual value are excluded. The DOE source documents this simple recovery approach; its historic technology prices are not used here.

Worked example

A 10,000 upfront cost, 3,000 annual gross saving and 500 added annual operating cost gives 2,500 annual net saving. Simple payback is four years. At the end of five identical years, undiscounted net is 2,500. If added annual operating cost becomes 3,000, annual net saving is zero, payback is undefined and cumulative net stays −10,000.

Sources and assumptions

The source material explains the underlying calculation or pricing structure. Entered prices, costs, schedules and scenario choices are your assumptions; this tool does not obtain supplier quotes or predict actual results.

• U.S. DOE lighting analysis: simple-payback method