Net Present Value (NPV) Calculator
Enter the initial investment, yearly net cash flow, number of years and discount rate to compute the net present value of an investment.
Input Data
Results
At a glance:NPV discounts future cash flows to present value and subtracts the initial outlay. PV of cash flows = Σ (annual cash flow ÷ (1 + discount rate)^year); NPV = PV of cash flows − initial investment. A positive NPV adds value at the required return.
Formula
PV of cash flows = Σ annual cash flow ÷ (1 + discount rate)^year, for year = 1..n.
NPV = PV of cash flows − initial investment.
How to Use
- Enter the initial investment (positive).
- Enter the yearly net cash flow, years and discount rate.
- Read the NPV and the present value of the cash flows.
FAQ
Does a positive NPV always mean I should invest?
A positive NPV means the return exceeds your required return (the discount rate), so in theory it is worthwhile. But you should still weigh risk, liquidity and opportunity cost; if two projects both have positive NPV, pick the higher one.
What is a reasonable discount rate?
Use your cost of capital or required return: conservative 4-6%, balanced 8-10%, higher risk 12%+. The higher the discount rate, the lower the NPV — it is a key subjective input.
How is NPV related to IRR?
IRR is the discount rate that makes NPV = 0. If IRR exceeds your required return, then NPV > 0 — the conclusions agree. They are complementary: IRR shows the 'rate of return', NPV shows the 'absolute amount'.
What if the cash flows are not fixed?
This tool assumes equal yearly cash flows. If they fluctuate a lot, enter them in segments or discount each period in a spreadsheet for a more accurate result.
Can the initial investment be negative (a subsidy)?
Yes. If there is an inflow such as a government grant, deduct it from the initial investment (or enter a smaller amount). This tool treats the positive value as an outflow, so reducing it raises the NPV.
How is NPV different from ROI?
ROI ignores the time value of money (total profit ÷ cost), while NPV builds it in. For long-term or uneven cash flows, NPV is the more reliable measure.
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References
Content review: Calculatorism Science Team. Results are for reference only; please refer to the relevant authorities for the official figures.