NPV Calculator
Decide whether an investment is worth it. Enter the upfront cost, the cash flows you expect and your required return to get the net present value, a full present value table, the profitability index, IRR and payback periods.
Your required return or cost of capital.
Enter as a positive amount; it is treated as a cash outflow.
One per line or separated by spaces/semicolons. Use a minus sign for outflows.
How to use the NPV Calculator
- Enter the discount rate: your required return or cost of capital per period.
- Enter the initial investment as a positive number.
- List the cash flows for period 1, 2, 3 … one per line; use a minus sign for later outflows.
- Pick the period length (years, quarters or months) so labels read correctly.
- Press Calculate to see NPV, the PV table, profitability index, IRR and payback.
The NPV formula
NPV = −C0 + CF1/(1 + r) + CF2/(1 + r)2 + … + CFn/(1 + r)n
- C0: the initial investment at period 0.
- CFt: the net cash flow in period t (negative for outflows).
- r: the discount rate per period, usually the required return or cost of capital.
- Profitability index = PV of future cash flows ÷ C0.
Decision rule: accept when NPV > 0 (PI > 1); reject when NPV < 0. When choosing between projects that exclude each other, pick the higher NPV.
Worked example at 8%
| Year | Cash flow | Discount factor | Present value | Cumulative PV |
|---|---|---|---|---|
| 0 | −$50,000.00 | 1.0000 | −$50,000.00 | −$50,000.00 |
| 1 | $12,000.00 | 0.9259 | $11,111.11 | −$38,888.89 |
| 2 | $15,000.00 | 0.8573 | $12,860.08 | −$26,028.81 |
| 3 | $18,000.00 | 0.7938 | $14,288.98 | −$11,739.83 |
| 4 | $20,000.00 | 0.7350 | $14,700.60 | $2,960.77 |
| 5 | $10,000.00 | 0.6806 | $6,805.83 | $9,766.60 |
NPV = $9,766.60 and the profitability index is 1.195, so the project earns more than 8% a year.
Frequently asked questions
What is the NPV formula?
NPV = −C0 + CF1/(1 + r)^1 + CF2/(1 + r)^2 + … + CFn/(1 + r)^n, where C0 is the initial investment, CFt the cash flow in period t and r the discount rate per period.
How do I interpret NPV?
A positive NPV means the investment is expected to earn more than your discount rate and add value. A negative NPV means it earns less. An NPV of zero means it earns exactly the discount rate.
What is the profitability index?
The profitability index (PI) is the present value of future cash flows divided by the initial investment. A PI above 1 matches a positive NPV; it is useful to rank projects when capital is limited.
What discount rate should I use for NPV?
Use the return you require for that level of risk, often a company's weighted average cost of capital (WACC) or the return on a comparable investment. If your cash flows are monthly, use a monthly rate.
What is the difference between NPV and IRR?
NPV gives a value in money at a chosen discount rate. IRR is the discount rate that makes NPV exactly zero. When projects differ in size or timing, NPV is usually the more reliable way to compare them.
What is discounted payback?
It is the time until the cumulative present value of cash flows covers the initial investment. It is longer than simple payback because later cash flows are worth less in today's money.
Does this match Excel's NPV function?
Excel's NPV treats the first value as period 1. To match this calculator, use =NPV(rate, CF1:CFn) − initial investment.