Calculator Inputs
Formula Used
This calculator models annual net cash flow and tracks when cumulative savings recover the initial outflow. It also discounts future cash flows to reflect the time value of money.
- Sales tax: SalesTax = ProjectCost × (SalesTax% ÷ 100)
- Gross upfront: GrossUpfront = ProjectCost + SalesTax + Fees
- Initial outflow (cash): InitialOutflow = GrossUpfront − UpfrontRebate
- Loan principal (loan): Principal = (GrossUpfront − DownPayment) + LoanFees
- Monthly payment: PMT = P × r(1+r)^n ÷ ((1+r)^n − 1), where r = APR/12
- Year y savings: Savings_y = Savings_1 × (1 + Escalation%)^(y−1)
- Year y maintenance: Maint_y = Maint_1 × (1 + MaintEsc%)^(y−1)
- Net cash flow: Net_y = Savings_y − Maint_y − DebtService_y
- Discounted net: DNet_y = Net_y ÷ (1 + DiscountRate%)^y
- Payback: first year where cumulative cash flow becomes non‑negative (with linear interpolation within that year).
How to Use This Calculator
- Enter the total project cost, any sales tax, and one‑time fees.
- Add the rebate amount and choose whether it is upfront or delayed.
- Provide Year‑1 gross savings and Year‑1 maintenance cost.
- Adjust escalation rates to reflect expected savings growth and maintenance inflation.
- Pick an analysis horizon and a discount rate for discounted payback and NPV.
- If financing, choose “Loan” and enter down payment, APR, term, and fees.
- Click “Calculate Payback” to see payback, NPV, and the cash‑flow table.
- Use the CSV/PDF buttons to export results for sharing or review.
Example Data Table
| Scenario | Project Cost | Rebate | Year‑1 Savings | Year‑1 Maintenance | Discount Rate | Expected Simple Payback |
|---|---|---|---|---|---|---|
| Efficiency retrofit (cash) | $8,500 | $1,200 upfront | $1,400 | $120 | 6% | ~5–6 years |
| Upgrade with delayed rebate | $8,500 | $1,200 after 3 months | $1,400 | $120 | 6% | Slightly longer than cash scenario |
| Financed project (loan) | $8,500 | $1,200 upfront | $1,400 | $120 | 6% | Depends on APR and term |
Example outputs are approximate and depend on rates, timing, and escalation.
Rebate Timing Changes True Recovery
Payback is not only about the rebate size; it is about when the rebate arrives. An upfront incentive reduces initial outflow immediately, while a delayed rebate acts like a later cash inflow. In this calculator, delayed rebates are discounted based on the delay months, which can push both simple and discounted payback later, especially when discount rates are high.
Annual Net Cash Flow Drives the Curve
Yearly net cash flow equals gross savings minus maintenance and any debt service. If savings escalate at 2.5% while maintenance rises at 2.0%, the net improves over time, steepening the cumulative line. If maintenance grows faster than savings, the curve flattens and payback may never occur within the selected horizon.
Financing Can Extend Payback
Loans convert part of the project cost into monthly payments. The calculator converts the monthly payment into an annual debt service figure, then subtracts it from savings each year until the loan term ends. Higher APRs or longer terms increase early-year outflows, often delaying payback even if the project looks attractive on a cash basis.
Discounted Payback Adds Realism
Discounted payback uses discounted net cash flow, dividing each year’s net by (1 + discount rate)^year. This reflects that future savings are worth less today. A 6% discount rate typically produces a later payback than simple payback, and the difference widens as rates rise or savings are back-loaded.
NPV and End-of-Horizon Value
Net present value is the cumulative discounted total at the horizon. Positive NPV suggests the project returns more than the chosen discount rate, while negative NPV signals value destruction under that assumption. Use NPV alongside payback: payback highlights liquidity timing, and NPV captures total economic benefit over the full period. For sensitivity, test low, base, and high savings, then vary rebate timing and discount rate. If simple payback is acceptable but discounted payback is long, consider alternatives, negotiate costs, or improve savings. Export CSV to document assumptions and compare bids consistently across multiple scenarios.
FAQs
1) What does “rebate adjusted payback” mean?
It is the time for cumulative net savings to recover the project’s net cost after rebates, fees, taxes, and financing effects. Timing matters: an upfront rebate reduces the initial outflow, while a delayed rebate is treated as a later inflow.
2) Why can discounted payback differ from simple payback?
Discounted payback reduces future cash flows using the discount rate, so later savings count less than near‑term savings. Higher discount rates, back‑loaded savings, or delayed rebates typically widen the gap between simple and discounted payback.
3) How is loan impact modeled here?
The calculator computes a monthly payment from APR and term, then converts it into yearly debt service for each year of the loan. That yearly debt service is subtracted from savings to estimate net cash flow during the financing period.
4) What escalation rates should I use?
Use savings escalation to reflect expected utility price growth or operational gains, and maintenance escalation for inflation in service costs. If uncertain, test a conservative case (lower savings, higher maintenance) and a best case to see how sensitive payback is.
5) What does NPV tell me in this report?
NPV sums discounted net cash flows over the chosen horizon. A positive NPV suggests returns exceed the discount rate assumption, while a negative NPV suggests the project underperforms that hurdle, even if payback occurs eventually.
6) What are common reasons payback is “not reached”?
Low savings, high maintenance, expensive financing, short analysis horizons, or high discount rates can keep cumulative cash flow negative. Extend the horizon, adjust assumptions, or reduce upfront cost to see what changes are needed to reach breakeven.