NPV Calculator
Calculate Net Present Value (NPV) and Internal Rate of Return (IRR) for any investment. Enter cash flows and discount rate to evaluate project profitability.
Cost of capital or required rate of return
NPV
+24,088.02
IRR
25.86%
Decision
Accept
Payback Period
Period 3
Cash Flow Details
| Period | Cash Flow | Discount Factor | Present Value |
|---|---|---|---|
| 0 | -50,000.00 | 1.0000 | -50,000.00 |
| 1 | +15,000.00 | 0.9091 | +13,636.36 |
| 2 | +18,000.00 | 0.8264 | +14,876.03 |
| 3 | +20,000.00 | 0.7513 | +15,026.30 |
| 4 | +22,000.00 | 0.6830 | +15,026.30 |
| 5 | +25,000.00 | 0.6209 | +15,523.03 |
| NPV (Sum of Present Values) | +24,088.02 | ||
What Is NPV (Net Present Value)?
Net Present Value (NPV) is a financial metric that calculates the present value of all future cash flows from an investment, discounted at a given rate, minus the initial cost. A positive NPV means the investment is expected to add value; a negative NPV means it destroys value at the chosen discount rate. NPV is one of the most widely used tools for capital budgeting and investment analysis.
How to Use
- Discount rate: the required rate of return or cost of capital (e.g. 10 for 10%)
- Period 0 (initial investment): enter as a negative number (e.g. -50000)
- Future cash flows: enter expected inflows as positive numbers for each period
- Add or remove periods with the + / − buttons; results update instantly
Key Metrics
- NPV > 0: investment creates value — generally accept the project
- NPV < 0: investment destroys value — generally reject the project
- NPV = 0: investment exactly meets the required return
- IRR: the discount rate at which NPV = 0; compare to your cost of capital
- Payback period: the period when cumulative cash flows turn positive
FAQ
What discount rate should I use?
Typically you use the Weighted Average Cost of Capital (WACC) for corporate projects, or a hurdle rate that reflects the risk of the investment. A riskier project warrants a higher discount rate, which lowers the NPV.
What is IRR and how is it different from NPV?
Internal Rate of Return (IRR) is the discount rate that makes NPV exactly zero. It represents the annualized return of the investment. If IRR exceeds your cost of capital, the project is profitable. Unlike NPV, IRR is expressed as a percentage, making it easy to compare across projects.
Why should I enter the initial investment as a negative number?
Convention in NPV analysis is that cash outflows (money you pay out) are negative and cash inflows (money you receive) are positive. The initial investment at period 0 is a cash outflow, so it is entered as a negative value.
What is a good NPV?
Any positive NPV adds value relative to the chosen discount rate. However, you should also consider the scale of investment — a $100 NPV on a $1M project is very different from a $100 NPV on a $1K project. Use NPV alongside IRR and payback period for a complete picture.