About the NPV Calculator
This NPV calculator tells you whether an investment is worth more than it costs once the time value of money is taken into account. Enter the up-front investment, the cash flow you expect in each future period and your discount rate (the return you could earn elsewhere at similar risk, or your cost of capital). It discounts every cash flow back to today and adds them up.
A positive net present value means the project is expected to earn more than your required return; a negative NPV means it earns less. Alongside NPV you get the internal rate of return (IRR), the profitability index (value created per dollar invested) and the discounted payback period, plus a chart and table comparing nominal and discounted cash flows by year.
Use it for capital budgeting, equipment purchases, new product launches, real-estate projects or comparing two investments of different sizes and timing. Cash flows are assumed to arrive at the end of each period; enter a negative number for any year with a net outflow, such as a later refit.
With the default inputs, the net present value is $22,614.27. Change any value above to recalculate instantly.
How to use the npv calculator
- 1Enter the up-front cost of the investment.
- 2Set your discount rate — your cost of capital or required return.
- 3List the expected net cash flow for each period, separated by commas.
- 4Add any salvage or resale value at the end.
- 5Accept projects with a positive NPV and compare IRR and payback.
Formula and method
Each future cash flow CFₜ is divided by (1 + r) raised to the number of periods until it arrives, converting it into today’s money at discount rate r. Summing these present values and subtracting the initial investment C₀ gives the net present value. Cash flows are assumed to occur at the end of each period.
The IRR is the rate that makes NPV equal zero, found numerically. The profitability index is the present value of future cash flows divided by the initial investment (above 1 means value is created), and the discounted payback period is when cumulative discounted cash flow turns positive, interpolated within the period.
- C₀
- Initial investment at time 0
- CFₜ
- Net cash flow in period t
- r
- Discount rate per period
- t
- Period number (1, 2, 3…)
Worked examples
$100,000 project over 4 years at 8%
The four cash flows total $150,000, but discounted at 8% they are worth $122,614 today. Subtracting the $100,000 cost leaves an NPV of $22,614, and the IRR of about 17.1% comfortably beats the 8% hurdle.
Level $60,000 a year for 5 years at 10%
Although the project returns $300,000 in total, those flows are worth only $227,447 today at 10%, so NPV is −$22,553. The 6.4% IRR is below the required 10%, and the investment is never recovered on a discounted basis.
Small equipment upgrade at 6%
Five savings of $5,000 are worth $21,061.82 at 6%, giving a small positive NPV of $1,061.82 and an IRR of about 7.9%. The discounted payback is roughly 4.7 years, close to the end of the equipment’s life.
Frequently asked questions
What does NPV tell you?+
Net present value measures how much value an investment adds in today’s dollars after covering its cost and your required return. A positive NPV means it beats the discount rate; a negative NPV means you would do better investing elsewhere at that rate.
What discount rate should I use for NPV?+
Use the return you require for the project’s level of risk — often your weighted average cost of capital (WACC) for a business, or the return on your next-best alternative for a personal investment. Riskier projects deserve higher rates.
What is the difference between NPV and IRR?+
NPV gives a dollar value at a chosen discount rate; IRR is the rate at which NPV equals zero. They usually agree on accept or reject, but when comparing mutually exclusive projects of different sizes, NPV is the more reliable guide.
How is NPV different from Excel’s NPV function?+
Excel’s NPV() discounts every value, including the first, by at least one period. To match this calculator in Excel, use =NPV(rate, CF1:CFn) − initial investment, keeping the time-0 outlay outside the function.
Can NPV be used for monthly cash flows?+
Yes, as long as the discount rate matches the period. For monthly cash flows convert an annual rate to a monthly one — (1 + annual rate)^(1/12) − 1 — and enter one cash flow per month.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.