NPV Calculator (Net Present Value)
NPV answers whether future cash flows justify today's investment, in today's money. Enter the investment, your discount rate, and the expected cash flows year by year — positive NPV means the project beats your required return.
How to use this calculator
- Enter the upfront investment and your discount rate (required annual return).
- List the expected cash flow for each year, comma-separated, in order.
- Press Calculate — each year's discounting is shown so you can audit it.
Formula used
Each future flow is shrunk by (1+r)ᵗ because money later is worth less than money now — it could have been earning r elsewhere. NPV > 0 means the project beats that alternative; the discount rate is where all the judgment hides.
Example calculation
Invest 1,000,000 at a 10% discount rate, flows 300k / 400k / 400k / 350k:
Present values: 272,727 + 330,579 + 300,526 + 239,055 = 1,142,887 → NPV ≈ +142,886. The naive sum (1.45M − 1M = 450k profit) shrinks to ~143k once time value is charged — still positive, so the project clears the 10% hurdle.
The logic of discounting
A rupee next year is worth less than one today — today's could be invested, and next year's carries risk. NPV formalizes that by charging every future flow "rent" at your discount rate, making projects with different timings directly comparable in today's money. It's the theoretical gold standard of capital budgeting: positive NPV literally means wealth created versus your best alternative.
Its outputs are only as honest as its inputs: cash-flow forecasts are guesses and the discount rate choice can flip a verdict. Testing NPV at several rates (or finding the rate where NPV = 0 — that's IRR) shows how robust the decision is.
Why use this calculator?
- Evaluate uneven multi-year cash flows properly — payback and ROI can't.
- See each year's discounting explicitly instead of a black-box answer.
- Compare the naive profit against the time-value-adjusted truth.
Frequently asked questions
What discount rate should I use?
Your opportunity cost of capital: companies use their weighted cost of capital (often 8–15%), individuals might use expected market returns (~10%) or a loan rate if borrowing funds. Higher risk warrants a higher rate — and when in doubt, test a range.
What does a negative NPV mean?
The flows, discounted, don't recover the investment — you'd end up poorer than investing at your discount rate elsewhere. It doesn't mean the project loses cash, just that it underperforms your required return.
NPV vs IRR — which should I trust?
They usually agree on accept/reject. NPV is more reliable for ranking mutually exclusive projects and handles odd cash-flow patterns better; IRR communicates as an intuitive percentage. Compute both — our IRR calculator takes the same inputs.