NPV Calculator
Discount a project's future cash flows to decide if it creates value
Put your project's numbers in
Free. No sign-up. The answer updates as you type.
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One payment, made now, before any money comes back. Type it as a positive number, for example 10000.
The least you are willing to earn per year for tying your money up. Type 10 for 10%.
Money the project brings back, one year at a time
One box per year. Add or remove years until the list matches how long you expect the project to run.
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At 10% a year, this project is worth $4,049 more than it costs
You pay $10,000 today and $19,000 comes back over 5 years. Money you have to wait for is worth less than money in your hand: if yours could earn 10% a year elsewhere, those payments are worth $14,049 today. That is $4,049 more than you pay.
The numbers behind that
What you pay at the start
One payment, today. It counts in full because it leaves your pocket now.
$10,000
Money coming back, added up
5 years of payments simply added together, as if waiting cost nothing.
$19,000
The same money, valued today
What those payments are worth now if your money could earn 10% a year elsewhere. The year by year table below shows each one.
$14,049
Left over after paying for it
$14,049 minus $10,000. This figure is the net present value (NPV).
$4,049
Value back for every $1 you put in
$14,049 divided by $10,000. Above $1 the project is worth more than it costs, below it less. Also called the profitability index.
$1.40
How much room this answer has
Click an option to jump to the field you would change.
- The money coming back: every year could come in 28.8% lower and the project would still cover its cost.
Year by year: what each payment is worth today
| Year | Money in that year | Value today of $1 in that year | Worth today |
|---|---|---|---|
| 1 | $3,000.00 | $0.9091 | $2,727.27 |
| 2 | $3,000.00 | $0.8264 | $2,479.34 |
| 3 | $4,000.00 | $0.7513 | $3,005.26 |
| 4 | $4,000.00 | $0.6830 | $2,732.05 |
| 5 | $5,000.00 | $0.6209 | $3,104.61 |
What happens if the return you want is different
Everything below uses the same money you entered above. Only the yearly return changes. Your own rate is the highlighted row.
| Return you want each year | Left over or short, valued today | Value back per $1 in | What that means |
|---|---|---|---|
| 2% | $7,818 | $1.78 | Worth more than it costs |
| 6% | $5,763 | $1.58 | Worth more than it costs |
| 10%yours | $4,049 | $1.40 | Worth more than it costs |
| 14% | $2,605 | $1.26 | Worth more than it costs |
| 18% | $1,380 | $1.14 | Worth more than it costs |
Across this whole range the project stays worth more than it costs, so the decision does not hinge on getting the rate exactly right.
Net present value is the workhorse of capital budgeting. It discounts every projected cash flow back to the present using a chosen rate, sums those present values, and subtracts the initial investment. The result tells you in today's money whether a project is expected to add or subtract value.
NPV = Σ CFt / (1 + r)^t − C0
Step 1: Type what you pay today to get the project started, before any money comes back.
Step 2: Type the yearly return you want on your money, for example 10 for 10%. Finance books call it the discount rate.
Step 3: Type the money you expect back in each year, after costs. Use Add year for a longer project, or the minus button next to a year to remove it.
Step 4: Read the answer, the year-by-year table and the range of rates underneath. They all recalculate while you type, so there is no button to press and nothing left on screen from a previous set of numbers.
What Is Net Present Value?
Net present value (NPV) is the sum of the present values of all the cash flows associated with an investment, including the initial outflow that starts it. Because money has a time value, a cash flow arriving years from now is worth less than the same amount today. NPV applies a discount rate to every future cash flow so that each one is expressed in today's money, then nets them against the upfront cost.
The single number NPV produces is a direct measure of value creation. A positive NPV means the project is expected to return more than the discount rate you required; a negative NPV means it is expected to return less. This is why NPV sits at the centre of capital budgeting, business valuation, and the discounted cash flow models used to value entire companies.
The NPV Formula
NPV = Σ CFt / (1 + r)^t − C0
In the formula, CFt is the cash flow in period t, r is the discount rate, t is the period number, and C0 is the initial investment made at time zero. Each future cash flow is divided by one plus the discount rate raised to the power of the period in which it occurs, which shrinks distant cash flows more than near-term ones.
The initial investment is subtracted because it is a cash outflow that occurs immediately and therefore needs no discounting. When the present value of the inflows exceeds the initial outlay, NPV is positive. The calculator above performs this period-by-period discounting for you and shows the discount factor and present value applied to each year.
One consequence of that division is worth stating plainly, because the calculator now refuses it rather than printing a number: the discount rate has to stay above -100%. At exactly -100% the denominator becomes zero and each year of cash flow would be divided by nothing; below it, the denominator turns negative and every second year swings the wrong way. A figure produced from either case would look like money and mean nothing at all.
The NPV Decision Rule
The decision rule is straightforward: accept an investment when its NPV is greater than zero and reject it when NPV is negative. A positive NPV indicates the project is expected to earn a return above the discount rate, adding value to the investor or firm. When choosing among several independent projects under a fixed budget, ranking them by NPV, or by the profitability index, which is the present value of inflows divided by the initial investment, helps allocate capital to the options that create the most value.
NPV is sensitive to the inputs you choose. Cash flow forecasts are estimates, and a higher discount rate reduces NPV while a lower rate raises it. For this reason analysts often test a range of discount rates and cash flow scenarios rather than relying on a single point estimate. NPV is a planning tool, not a guarantee of future results.
That is what the table of rates above the article is for. It reruns your own cash flows at rates either side of the one you chose, so instead of a single figure you can see the whole band and where inside it the answer changes sign. A project that stays positive across the band is a different proposition from one that flips a percentage point away from your assumption, even when both show the same number at the rate you happened to type.
NPV vs IRR and Choosing a Discount Rate
NPV and the internal rate of return (IRR) are complementary. NPV reports the amount of value, in money, an investment is expected to add at a discount rate you specify, while IRR is the discount rate that would make NPV exactly zero. Analysts often favour NPV when comparing mutually exclusive projects, because IRR can give misleading rankings when projects differ in size or when cash flows change sign more than once, producing multiple internal rates of return. You can explore the related IRR calculator to see the rate at which a given set of cash flows breaks even.
Choosing the discount rate is the most consequential judgement in an NPV analysis. Companies typically use their weighted average cost of capital, which blends the cost of debt and equity in proportion to how they finance themselves. You can estimate it with the WACC calculator. Individual investors often use a personal required rate of return instead. If you want to understand the discounting mechanics behind a single future amount, the present value calculator breaks down the time value of money one cash flow at a time.
Frequently Asked Questions About the NPV Calculator
A positive NPV means the present value of a project's expected future cash flows exceeds its initial cost when discounted at your required rate of return. In other words, the investment is forecast to earn more than your hurdle rate and create value. The standard decision rule is to accept projects with a positive NPV and reject those with a negative NPV.
NPV measures the amount of value, in money, an investment is expected to add at a chosen discount rate, while the internal rate of return (IRR) is the single discount rate that makes NPV equal to zero. NPV is generally preferred for ranking mutually exclusive projects because IRR can be misleading when cash flows change sign more than once or when projects differ in scale.
The discount rate should reflect the opportunity cost and risk of the cash flows. Companies commonly use their weighted average cost of capital (WACC). Individual investors often use their required rate of return, the minimum annual return they would accept for taking on the risk. A higher discount rate lowers NPV, so the rate you choose strongly affects the accept-or-reject decision.
Yes. Type a minus sign in front of the amount for that year and the calculator discounts it exactly like any other figure, subtracting its present value instead of adding it. This is how you handle a planned overhaul, a replacement of equipment part-way through, or any year the project is expected to cost more than it brings in. Leaving a year blank is different: a blank year is counted as zero money that year, and the calculator tells you which years it treated that way.
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Educational use only. This tool provides estimates for informational purposes and does not constitute financial, investment, tax, or legal advice. Results are based on inputs you provide and mathematical models, they do not guarantee future performance. Always consult a qualified financial adviser before making investment decisions.