NPV Calculator
Enter today's investment and the cash flows that follow, then a discount rate, to see whether the project is worth more than it costs.
Free, no sign-upRuns in your browserHow we calculate
Negative = money you pay, positive = money you receive.
Your required return or cost of capital.
- Present value of inflows
- $11,776.66
- Initial cash flow (today)
- -$10,000.00
- Profitability index
- 1.178
- IRR
- 16.341%
- Payback period
- 2.41 periods
| Period | Cash flow | Discount factor | Present value |
|---|---|---|---|
| 0 | -$10,000.00 | 1 | -$10,000.00 |
| 1 | $3,000.00 | 0.9259 | $2,777.78 |
| 2 | $4,200.00 | 0.8573 | $3,600.82 |
| 3 | $6,800.00 | 0.7938 | $5,398.06 |
How this was calculated
- NPV = Σ CFₖ ÷ (1 + r)^k with r = 8% per period.
- Add the present values in the table: $1,776.66.
Educational calculation, not financial advice. The result depends entirely on the discount rate you choose.
How net present value works
Net present value (NPV) converts a stream of future payments into today’s money. Each cash flow is divided by (1 + r)^k, where r is the discount rate per period and k is how many periods away it is, and the results are added together: NPV = CF₀ + CF₁/(1+r) + CF₂/(1+r)² + … The first cash flow, usually the investment, happens today and is not discounted. A positive NPV means the project returns more than your required rate; a negative NPV means you would do better elsewhere.
Worked example
Pay $1,000 today and receive $500 at the end of each of the next three years, with a 10% discount rate. The present values are 500 ÷ 1.10 = $454.55, 500 ÷ 1.21 = $413.22 and 500 ÷ 1.331 = $375.66, which add up to $1,243.43. Subtract the $1,000 outlay and the NPV is +$243.43; the profitability index (PV of inflows ÷ outlay) is 1.243. The tool shows this table for any cash flows you enter.
Choosing a discount rate
The discount rate is the return you could earn on a comparable investment, or your cost of capital. For a personal decision it is often the return on a diversified portfolio or the interest rate on debt you would otherwise repay. Raising the rate shrinks the present value of distant payments, so long projects are the most sensitive. The rate at which NPV reaches zero is the IRR, which the tool reports too. For an overall percentage gain without timing, use the ROI calculator.
Common mistakes
Do not mix annual and monthly figures: if the cash flows are monthly, the discount rate must be a monthly rate too (a 6% annual rate is about 0.487% a month). Excel’s NPV() function assumes the first value arrives after one period, so you must add the initial outlay separately; this calculator treats the first number as today, like the textbook formula. Finally, NPV is only as good as the forecast of the cash flows: test optimistic and pessimistic versions before deciding. Educational, not investment advice.
Frequently asked questions
What is net present value?
NPV is the sum of all future cash flows discounted to today's money, minus the initial investment: NPV = Σ CFₖ ÷ (1 + r)^k. A positive NPV means the project earns more than the discount rate.
How do you calculate NPV?
Divide each cash flow by (1 + r)^k, where k is the period number, and add them up, counting today's investment as a negative flow in period 0. Paying $1,000 and receiving $500 for three years at 10% gives +$243.43.
What discount rate should I use?
Use the return you could earn on an investment of similar risk, or your cost of capital. For personal decisions, the return of a diversified portfolio or the interest rate on your debt are common choices.
Why is my result different from Excel's NPV function?
Excel's NPV() assumes the first value arrives after one period. This calculator treats the first number as today, the textbook formula, which equals Excel's CF₀ + NPV(rate, CF₁:CFₙ).
What does a profitability index mean?
It is the present value of the inflows divided by the initial outlay. Above 1 means a positive NPV; 1.243 means every dollar invested returns $1.243 in present-value terms.