NPV calculator (net present value)
Enter your discount rate, the initial investment and the expected cash flow for each year. You get NPV, IRR, profitability index and discounted payback, plus a year-by-year discounted cash-flow table.
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Result
1 839
Net present value (NPV)
- Present value of future cash flows11 839
- Initial investment (year 0)10 000
- Internal rate of return (IRR)18.03%
- Profitability index (PV ÷ investment)1.18
- Discounted payback3.1 years
Positive NPV — the project beats your required return
NPV adds every cash flow after discounting it back to today. Above zero means the investment creates value at this rate; IRR is the rate where NPV is exactly zero. This is a model, not financial advice.
Discounted cash-flow table
| Year | Cash flow | Discount factor | Present value | Cumulative PV |
|---|---|---|---|---|
| 0 | −10 000 | 1 | −10 000 | −10 000 |
| 1 | 3 000 | 0.9091 | 2 727 | −7 273 |
| 2 | 4 000 | 0.8264 | 3 306 | −3 967 |
| 3 | 5 000 | 0.7513 | 3 757 | −210 |
| 4 | 3 000 | 0.683 | 2 049 | 1 839 |
About this tool
What is net present value?
Net present value (NPV) is the value today of all future cash flows from an investment, minus what it costs now. Money received later is worth less than money today, so each future amount is discounted at your required rate of return (discount rate).
NPV formula
NPV = CF₁ ÷ (1 + r) + CF₂ ÷ (1 + r)² + … + CFₙ ÷ (1 + r)ⁿ − C₀, where C₀ is the initial investment, CFₜ the net cash flow in year t and r the discount rate.
How to read NPV and IRR
NPV above zero: the project earns more than your discount rate and adds value. NPV below zero: it earns less. The internal rate of return (IRR) is the discount rate at which NPV equals exactly zero, so a project with IRR above your required rate has a positive NPV.
Worked example
Investment 10 000, discount rate 10%, cash flows 3 000, 4 000, 5 000 and 3 000. Present values: 3 000 ÷ 1.1 = 2 727; 4 000 ÷ 1.21 = 3 306; 5 000 ÷ 1.331 = 3 757; 3 000 ÷ 1.4641 = 2 049. Sum = 11 839, so NPV = 11 839 − 10 000 = 1 839. IRR ≈ 18.0%, profitability index 1.18, discounted payback ≈ 3.1 years.
Disclaimer
This NPV calculator is an educational model, not financial advice. Results depend entirely on your cash-flow estimates and discount rate.
Formula
NPV = Σ CFₜ ÷ (1 + r)ᵗ − C₀, t = 1 … nDiscount factor = 1 ÷ (1 + r)ᵗIRR: the r for which NPV = 0PI = PV of future cash flows ÷ C₀
How it is calculated
- Enter the discount rate — your required return or cost of capital.
- Enter the initial investment as a positive amount.
- Add the net cash flow for each year; use a minus sign for years with extra spending.
- Read NPV, IRR, profitability index and payback, then check the year-by-year table.
Questions
How do you calculate NPV?
Divide each year's cash flow by (1 + r) to the power of the year, add them up and subtract the initial investment. With 10 000 invested at 10% and flows of 3 000, 4 000, 5 000 and 3 000, NPV = 1 839.
What discount rate should I use?
Use the return you could earn elsewhere at similar risk: your cost of capital (WACC) for a business, or a loan rate or expected market return for personal decisions. Riskier projects deserve a higher rate.
What is the difference between NPV and IRR?
NPV is an amount of money created at a chosen rate; IRR is the rate at which NPV becomes zero. IRR can be misleading when cash flows change sign more than once, so NPV is the safer decision rule.
Why does the calculator show no IRR?
IRR exists only when the cash flows change from negative to positive at least once. If all flows are positive, or the project never pays back its cost, there is no rate that makes NPV zero.