πΉ Net Present Value Calculator
Is this investment worth more than it costs, in today\'s dollars?
Present value of cash flows minus investment
Estimates for planning only, not financial advice.
Net present value discounts every future dollar an investment will produce back to today's dollars, then subtracts what you pay upfront. Positive NPV means the project creates wealth beyond your required return; negative means it destroys it. It is the single most trusted decision rule in finance, because unlike payback or accounting return, it respects the time value of money.
How to Use This Calculator
Enter the upfront investment and your discount rate: usually your cost of capital or minimum acceptable return. Then list the expected cash inflow for each year, separated by commas. The calculator discounts each year, totals them, subtracts the investment, and gives the verdict.
Enter the initial investment as a positive number and pick a discount rate that reflects your required return and risk.
List yearly cash flows in order, comma separated. Use after-tax operating cash flows, not accounting profit.
Read NPV. Positive means go. To find the discount rate where NPV hits zero, use our IRR calculator.
The NPV Formula
Each future cash flow is divided by a compounding discount factor, so distant dollars count for less. The discount rate is doing two jobs: it reflects the time value of money and it charges the project for risk. A riskier project deserves a higher rate, which is why the same cash flows can have a positive NPV for one investor and a negative NPV for another.
Worked Example
A project costs $100,000 today and returns $40,000, $50,000, and $60,000 over three years, with a 10 percent discount rate. The present values are $36,364, $41,322, and $45,079, totaling $122,765. Subtract the $100,000 investment and NPV is $22,765. Positive, so the project creates about $22,765 of wealth above a 10 percent return. The undiscounted total of $150,000 looks better, but $27,235 of it is just compensation for waiting and risk.
Reading Your Result
The rule is simple: accept positive NPV, reject negative. When comparing projects, the higher NPV wins, but only among mutually exclusive options of similar scale; a giant project with NPV of $1 million can be worse than a small one with NPV of $500,000 if capital is limited. Also remember NPV is only as honest as its cash flow forecasts, which is where most bad decisions are actually made.
My rule: stress-test the discount rate before you commit. If a project is barely positive at 10 percent but deeply negative at 12, you do not have a good project, you have a fragile forecast. Run the pessimistic cash flows, not the pitch deck ones. And never compare NPVs computed with different discount rates; that is like comparing temperatures in different scales. For the simpler payback view alongside NPV, our payback period calculator gives the break-even timing.
When NPV and payback disagree, trust NPV: it counts every dollar and discounts it properly, while payback stops counting the day it breaks even.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is net present value?
Net present value is today's value of an investment's future cash flows minus its upfront cost. Each future dollar is discounted by the required rate of return, so NPV measures wealth created above that return. Positive NPV means the investment beats your hurdle; negative means it falls short.
How do you calculate NPV?
Discount each year's expected cash flow by dividing by (1 + r) raised to the year number, sum them, and subtract the initial investment. Choose r as your cost of capital or minimum acceptable return. The sign of the result is the decision.
What discount rate should I use?
Your opportunity cost of capital: what the money could earn elsewhere at similar risk. Companies use their weighted average cost of capital (WACC). Individuals often use 7 to 10 percent as a long-run market proxy. Higher risk demands a higher rate.
What is the difference between NPV and IRR?
NPV is a dollar amount of value created at a given discount rate. IRR is the discount rate that makes NPV zero: the project's own rate of return. NPV is the better decision rule because it measures absolute wealth; IRR can mislead when comparing projects of different sizes or with unusual cash flow patterns.
Why is NPV better than payback period?
Payback ignores the time value of money and everything after the payback date. A project that pays back in two years then collapses looks great on payback and terrible on NPV. NPV counts every dollar and discounts it properly. A two-year payback on a ten-year project can still destroy value if the later cash flows turn negative.
Can NPV be negative if the project makes money?
Yes, easily. If cash flows total more than the investment but arrive late or the discount rate is high, their present value can fall short. That is NPV doing its job: the project earns something, just less than your money could earn elsewhere.
How do taxes affect NPV?
Use after-tax cash flows: subtract taxes from operating cash flows and add back the tax shield from depreciation. The discount rate is typically after-tax too (WACC is computed after tax). Mixing pre-tax cash flows with an after-tax rate is a common error.
What cash flows belong in an NPV analysis?
Incremental after-tax operating cash flows caused by the project, including working capital changes and terminal value, minus the initial outlay. Exclude sunk costs already spent and financing flows like loan repayments; the discount rate already accounts for financing. Opportunity costs belong in: using an owned building for the project means counting the forgone rent.
How sensitive is NPV to the forecast?
Very. Small changes in distant cash flows or the discount rate swing NPV hard, because compounding magnifies them. Always run optimistic, base, and pessimistic cases. A project that is positive only in the optimistic case is a gamble, not an investment.
What is terminal value in NPV?
The value of cash flows beyond your explicit forecast, often estimated with a perpetuity formula: final-year cash flow times (1 + growth) divided by (rate minus growth). For long-lived projects it can dominate NPV, so its assumptions deserve the most scrutiny, not the least.