NPV Calculator
Compute NPV from an initial investment, discount rate, and annual cash flows. Useful for simple project and investment comparisons.
NPV Calculator tool
Tip: upfront cost is usually negative (cash outflow).
Annual discount rate (required return / hurdle rate).
Comma-separated. Use negative values if needed.
| Year | Cash Flow | Discount Factor | Present Value |
|---|
Informational estimate only. Assumes end-of-year cash flows and constant annual discount rate.
Net Present Value (NPV) converts future cash flows into today’s value using a discount rate. You can use it to compare projects or investments on a like-for-like basis.
The calculation assumes each cash flow occurs at the end of a year:
NPV = Initial + Σ (CFt / (1 + r)t)
where r is the annual discount rate and t is year number.
Interpretation (rule of thumb): NPV > 0 suggests returns exceed the discount rate, while NPV < 0 suggests the opposite. Always validate assumptions (timing, risk, taxes).
Examples
- Initial: -10,000, Rate: 8%, Flows: 3,000,3,000,3,000,3,000 → compute NPV
- Try a higher discount rate to see how NPV falls as required return increases
- Include a negative cash flow in later years for maintenance or reinvestment
FAQ
- What is NPV (Net Present Value)?
NPV is the present value of future cash flows minus the initial investment. A positive NPV suggests the project exceeds the required return (discount rate).
- What discount rate should I use?
Use your required return, cost of capital, hurdle rate, or an opportunity cost rate. Higher discount rates reduce present value of future cash flows.
- Do cash flows have to be yearly?
This calculator assumes cash flows occur once per year (end of each year). If your cash flows are monthly/quarterly, convert them to annual equivalents or use a period-based model.
- Should the initial investment be negative?
Typically yes (cash outflow). Example: -10000 for an upfront cost. If you enter a positive number, NPV will increase by that amount.
- Does this include taxes and inflation?
No. Use after-tax cash flows if you want after-tax NPV, and consider a discount rate consistent with nominal vs real cash flows.