Skip to main content

DigitalCalculators.net

Menu

NPV Calculator

Find the net present value (NPV) of an investment from a discount rate and yearly cash flows, with the present value of each year and the IRR.

Results

ItemValue

Present value by year

YearCash flowDiscount factorPresent valueRunning total
Enter money you put in later as a negative number, such as −2,000. Up to 50 years. Cash flows are treated as happening at the end of each year, and the initial investment today.

Quick Answer

NPV = −initial investment + the sum of each cash flow ÷ (1 + r)^year. Investing $10,000 to get $3,000, $4,000, $5,000 and $2,000 over four years, at an 8% discount rate, gives an NPV of $1,646.35. A positive NPV means the investment earns more than the discount rate.

Last updated: 2 November 2026 ·How we calculate this: the net present value (NPV) method

Table of Contents

How This NPV Calculator Works

Enter the discount rate, which is the return you need, the initial investment and the cash you expect each year. The calculator turns each future cash flow into today’s money and adds them up. Then it subtracts the investment to give the NPV, and shows the profitability index, discounted payback and IRR.

Quick explanation: a dollar later is worth less than a dollar today, so future cash is discounted.

  • NPV above 0: the project beats your required return.
  • NPV below 0: it falls short.
  • NPV of 0: it earns exactly the discount rate.

How to Use the NPV Calculator

  1. Enter the discount rate, or the return you need.
  2. Enter the initial investment as a positive number.
  3. Enter each year’s cash flow, one per line. Use a minus sign for more money put in.
  4. Press Calculate.
  5. Read the NPV and decision, and check the present value of each year in the table.

Core Formulas

  • NPV: −C₀ + CF₁ ÷ (1 + r) + CF₂ ÷ (1 + r)² + … + CFₙ ÷ (1 + r)ⁿ
  • Discount factor: 1 ÷ (1 + r)^t
  • Profitability index: present value of cash flows ÷ initial investment

C₀ is the initial investment, CFₜ is the cash flow in year t, and r is the discount rate as a decimal.

Key Terms

  • Net present value (NPV): the value today of all future cash flows minus the initial investment.
  • Discount rate: the yearly return used to convert future money to today’s value.
  • Present value: what a future amount is worth today.
  • Profitability index: present value of cash flows divided by the initial investment. Above 1 is good.
  • Discounted payback: how long it takes for discounted cash flows to repay the investment.

Worked Example

A machine costs $50,000 and saves $15,000 a year for 5 years. Your required return is 10%.

  • Present value of savings = $15,000 × 3.7908 = $56,861.80
  • NPV = $56,861.80 − $50,000 = $6,861.80
  • The NPV is positive, so the machine is worth buying at a 10% required return

Real-Life Examples

  • Buying equipment: the $50,000 machine above has an NPV of $6,861.80 at 10%, but -$3,092.43 at 18%.
  • Choosing between projects: at 8%, project A (−$10,000, then $6,000 for 2 years) has an NPV of $699.59, and project B (−$10,000, then $0 and $12,500) has $716.74.
  • A rental property: $60,000 down, $4,000 a year for 4 years and $79,000 in year 5, at 9%, gives an NPV of $4,303.46.
  • A lump sum offer: with no initial investment, $1,000 a year for 10 years at 5% is worth $7,721.73 today.

NPV vs IRR

  • NPV: a dollar amount at a rate you choose. It shows how much value a project adds.
  • IRR: the rate at which NPV is zero. It shows the project’s own return.
  • When they disagree: for projects of different sizes, finance texts usually prefer NPV.
  • Together: if the IRR is above your discount rate, the NPV is positive.

Present Value of $1,000

Years away5%8%10%12%
1$952.38$925.93$909.09$892.86
2$907.03$857.34$826.45$797.19
3$863.84$793.83$751.31$711.78
5$783.53$680.58$620.92$567.43
10$613.91$463.19$385.54$321.97
20$376.89$214.55$148.64$103.67

Choosing a Discount Rate

  • Cost of capital: businesses often use their weighted average cost of capital (WACC).
  • Loan rate: if you borrow to invest, use at least the loan’s interest rate.
  • Other options: use the return you could earn elsewhere with similar risk.
  • Risk: riskier projects call for a higher rate, which lowers the NPV.

Common Mistakes to Avoid

  • Entering the rate as a decimal. Enter 8 for 8%, not 0.08.
  • Including the investment twice. Put it only in the initial investment box.
  • Forgetting end values. Add any sale or salvage value to the last year.
  • Using a rate that is too low. A low rate makes almost any project look good.
  • Mixing nominal and real figures. If cash flows include inflation, the rate should too.

Frequently Asked Questions

The investment is expected to earn more than your discount rate, so it adds value.

The investment earns less than your required return, so it would lose value compared with your alternative.

Use your cost of capital, the interest rate on money you borrow, or the return you could earn elsewhere with similar risk.

Divide each future cash flow by (1 + rate) raised to its year, add them up, and subtract the initial investment.

Use =NPV(rate, year 1 to year n cash flows) and then add the initial investment as a negative number. Excel’s NPV assumes the first cash flow is one year away.

Many finance texts prefer NPV for choosing between projects, because it shows the dollar value added. IRR is useful as a rate to compare.

The present value of the cash flows divided by the investment. A value above 1 matches a positive NPV.

Yes, for example to compare a lump sum with payments over time, or to judge solar panels or a rental property.

Future cash is divided by a bigger number, so it is worth less today.

Only if your cash flows and discount rate both include it. Keep them consistent.

Any NPV above zero meets your required return. When comparing projects of a similar size, a higher NPV is better.

Present value is what future cash is worth today. NPV subtracts the cost of the investment from it.

References & Sources

SourceUsed ForLink
Corporate Finance Institute, Net present value (NPV) Formula and examples. https://corporatefinanceinstitute.com/resources/valuation/net-present-value-npv/
Wikipedia, Net present value Definition, formula and decision rules. https://en.wikipedia.org/wiki/Net_present_value