NPV Calculator
Net present value, IRR, profitability index, and discounted payback for any project
NPV Calculator
Inputs
Results
| Yr | Cash Flow | DCF | Cumulative |
|---|---|---|---|
| 1 | $25,000 | $22,727 | -$77,273 |
| 2 | $30,000 | $24,793 | -$52,479 |
| 3 | $35,000 | $26,296 | -$26,183 |
| 4 | $40,000 | $27,321 | $1,137 |
| 5 | $45,000 | $27,941 | $29,079 |
Based on your results — what to do next:
Compare projects by IRR
This project returns 19.71% — rank it against competing uses of the same capital.
Check the plain-English ROI
$75,000 in undiscounted net cash — see the simple return before time-value adjustments.
Value the whole business this way
The same discounting that produced $29,079 NPV drives what an acquirer will pay for your company.
Net present value (NPV) discounts every future cash flow back to today's dollars and subtracts what the project costs upfront. A $100,000 investment returning $25,000, $30,000, $35,000, $40,000, and $45,000 over five years has an NPV of about +$29,100at a 10% discount rate — it earns roughly $29,100 more, in today's dollars, than the 10% you demanded. This calculator also returns the IRR, the profitability index, both simple and discounted payback periods, and a sensitivity table showing how the decision flips as your cost of capital changes.
How Net Present Value Is Calculated
NPV applies the time value of money to a project: a dollar arriving in year five is worth less than a dollar today, because today's dollar could have been invested. Each future cash flow is divided by a discount factor that grows with time, then all the discounted values are added up and the initial outlay is subtracted.
| Variable | Definition |
|---|---|
| CFt | Net cash flow received in year t (can be negative) |
| r | Discount rate — your cost of capital or required return |
| t | Year number, from 1 through the end of the project |
| C0 | Initial investment at time zero |
Worked example: invest $100,000 today; receive $25,000, $30,000, $35,000, $40,000, and $45,000 in years 1–5; discount at 10%. Discounted values are 25,000 ÷ 1.10 = $22,727; 30,000 ÷ 1.21 = $24,793; 35,000 ÷ 1.331 = $26,296; 40,000 ÷ 1.4641 = $27,321; and 45,000 ÷ 1.6105 = $27,941. Those sum to $129,078. NPV = 129,078 − 100,000 = +$29,078, and the profitability index is 129,078 ÷ 100,000 = 1.29.
The IRR is the discount rate that would drive NPV to exactly zero — here roughly 19.7%. Any cost of capital below that makes the project worth funding. The calculator finds it numerically by bisection, which is more reliable than trial-and-error for irregular cash flow patterns.
💡 Expert Pro-Tip
Sensitivity Analysis Matters More Than the Point Estimate: A single NPV figure carries false precision, because it inherits every assumption in your cash flow forecast. What actually informs the decision is how quickly the answer breaks. Use the sensitivity table above: if NPV stays positive from 8% all the way to 20%, the project is robust and you can move forward without a perfect WACC estimate. If it flips negative at 12% when your true cost of capital is 11%, you are one modest forecast miss from destroying value — and the honest response is to tighten the cash flow assumptions before committing, not to defend the original number.
NPV Calculator FAQ
What does a positive NPV actually mean?
It means the project returns more than the benchmark you set. A +$29,000 NPV at a 10% discount rate does not mean you earn $29,000 — it means you earn your full 10% required return plus$29,000 of surplus value in today's dollars. An NPV of exactly zero is not a failure either: it means the project earns precisely your required return, no more.
How do I choose the discount rate?
Use your weighted average cost of capital, or the return you could earn on an alternative of similar risk. Typical anchors: mature corporations 8–12%, small businesses 10–15%, real estate projects 8–14%, and early-stage ventures 25–40%. The rate should reflect the riskiness of the cash flows, and small changes matter — moving from 10% to 14% can easily cut NPV in half on a long-dated project.
NPV or IRR — which should I trust?
NPV, when they disagree. IRR is intuitive because it is a percentage, but it breaks in two common situations: cash flows that switch sign more than once can produce multiple valid IRRs, and IRR implicitly assumes intermediate cash flows are reinvested at the IRR itself, which is usually unrealistic for high-IRR projects. NPV has neither problem. Use IRR as a communication shorthand and NPV as the decision rule.
What is the discounted payback period?
The time it takes for the discounted cash flows to recover the initial investment. It is always longer than simple payback, which ignores the time value of money entirely. Payback is a useful liquidity and risk screen — how long is your capital exposed — but it should never be the primary decision metric, because it ignores everything that happens after the break-even point.
Should cash flows be before or after tax?
After tax, and they should be genuine cash flows rather than accounting profit. Add depreciation back (it is a non-cash expense), subtract capital expenditures and increases in working capital, and exclude interest if your discount rate is a WACC — otherwise you double-count the cost of debt. Sloppy cash flow construction distorts NPV far more than a slightly wrong discount rate.
Can I use NPV to value a whole business?
Yes — that is discounted cash flow valuation, the same math applied to a company's projected free cash flows plus a terminal value for everything beyond the forecast horizon. For a faster, multiple-based estimate that acquirers actually use in practice, try the business valuation calculator.