NPV Calculator

Calculate net present value (NPV) for an investment from the upfront cost, discount rate and expected cash flows, and get the IRR, profitability index, payback and discounted payback with a year-by-year present value schedule. Example: a $10,000 investment returning $3,000, $4,000, $5,000 and $3,000 at 8% has an NPV of $2,381.

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Initial investment

Discount rate (per period)

Cash flows for periods 1, 2, 3… (separated by commas or new lines; negatives allowed)

Salvage or terminal value at the end (optional)

How to use the NPV Calculator

Enter the initial investment and your discount rate (your required return).
List the expected cash flow for each period, separated by commas.
Press Calculate to get NPV, IRR, profitability index, payback and the schedule.

Formula and method

NPV = sum of CFt / (1 + r)^t for t = 1 to n, minus the initial investment. IRR is the rate that makes NPV equal zero. Profitability index = present value of cash flows / initial investment. Discounted payback is the time to recover the investment from discounted cash flows.

Worked example: $10,000 at 8%

Period	Cash flow	Present value
1	$3,000	$2,777.78
2	$4,000	$3,429.36
3	$5,000	$3,969.16
4	$3,000	$2,205.09
Total PV	$15,000	$12,381.38
NPV (PV – $10,000)		$2,381.38

How to read the result

NPV	Meaning	Decision rule
Above 0	Beats the required return	Accept
Equal to 0	Meets the required return exactly	Indifferent
Below 0	Falls short	Reject

NPV versus IRR

NPV gives a dollar value of the value created, so it ranks projects of different sizes correctly. IRR gives a percentage but can mislead with unusual cash flows or when comparing mutually exclusive projects, so use both together.

Choosing a discount rate

Use your cost of capital, the return available on a similar-risk alternative, or a rate that includes inflation if your cash flows do. A higher rate lowers NPV because distant cash is worth less today.

Frequently asked questions

What is NPV?

The present value of future cash flows minus the initial investment.

What is a good NPV?

Any positive NPV means the project beats your required return.

How is NPV different from the Excel NPV function?

Excel NPV discounts every value from period 1, so you must subtract the initial investment yourself. This calculator does it for you.

What discount rate should I use?

Your required return or weighted average cost of capital.

Can cash flows be negative?

Yes. Enter negative numbers for later outlays.

What is IRR?

The discount rate at which NPV equals zero.

Sources

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Effortless Math Team

11 minutes ago