π° Finance & Investing
Net Present Value (NPV) Calculator
Calculate NPV of any project with future cash flows. Free NPV calculator for US finance and investment teams.
What This Calculator Tells You
Net present value (NPV) tells you how much a project or investment is worth today, after converting all its future cash flows into today's dollars at a discount rate that reflects your cost of money and risk.
A positive NPV means the investment earns more than your required return and adds value; a negative NPV means it does not.
What to Enter
- Discount rate (%) β your required annual return: the cost of capital for a business, or the return you could get elsewhere at similar risk for a personal investment.
- Cash flows incl. t=0 β comma-separated, in order, one per year. The first value is today's outflow (negative). Each later value is the net cash flow for that year.
Worked Examples
1. An equipment upgrade at 10%
Cost $100,000; savings of $30,000, $35,000, $40,000 and $45,000 over four years.
- Rate 10%, flows β100000, 30000, 35000, 40000, 45000 β NPV +$16,986.54 β accept.
2. A near-miss
Cost $20,000 returning $8,000 a year for three years, at 10%.
- NPV β$105.18. It returns $24,000 in total but slightly less than 10% a year, so it fails at this rate.
3. Income plus a final sale
$50,000 investment, $5,000 a year for three years, then $60,000 in year 4, at 8%.
- NPV +$6,987.28.
How It’s Calculated
- Ξ£: Summation
- CF_t: Cash flow at time t
- r: Interest / discount rate (decimal per period)
- t: Time (years or periods)
How to Read Your Result
- NPV > 0: the project earns more than the discount rate β it adds value.
- NPV = 0: it earns exactly the discount rate (that rate is the IRR).
- NPV < 0: you would be better off with the alternative return.
- Sensitivity: re-run at a higher discount rate. A project that only works at a low rate is fragile.
Common Mistakes to Avoid
- Entering the initial cost as positive. It must be negative.
- Using a discount rate that ignores risk. Riskier projects deserve higher rates.
- Counting financing costs in the cash flows and in the discount rate β that double-counts interest.
- Using accounting profit instead of cash flow; depreciation is not cash.
When to Use This Calculator
- Decide whether a capital project is worth funding.
- Compare investments of different sizes and timelines in today's dollars.
- Value a stream of future payments, such as a settlement or contract.
- Test how sensitive a business case is to the discount rate.
Frequently Asked Questions
What is the NPV formula?
NPV = Ξ£ CFt Γ· (1 + r)t for t = 0 to n, where CFt is the cash flow in period t and r is the discount rate.
What discount rate should I use?
For a business, its weighted average cost of capital (WACC), often 8β12% for established companies and higher for startups. For personal decisions, the return you could earn elsewhere at similar risk.
Is NPV better than IRR?
NPV gives a dollar value and handles unusual cash flows reliably, so it is preferred for choosing between projects. IRR is easier to communicate. Use both.
Does the first cash flow get discounted?
No. The t=0 flow happens today, so it is counted at full value.
Do you store the values I enter?
No. All calculations happen in your browser. Your data never leaves your device.
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