Calculate the net present value of a project from its cash flows and discount rate.
Calculated instantly in your browser.
How is net present value (NPV) calculated?
NPV = −initial investment + Σ (cash flowₜ ÷ (1 + r)ᵗ), where r is the discount rate and t is the year (1, 2, 3 …). A positive NPV means the discounted returns exceed the cost, so the project adds value. At a 10% rate, an initial 1,000 with three yearly cash flows of 500 has a present value of about 1,243, giving an NPV of about 243.
Understanding your result
A positive NPV means the discounted returns exceed the cost, so the project adds value at that rate. The profitability index (PV ÷ initial) above 1 signals the same.
Formula and method
NPV = −initial investment + Σ (cash flowₜ ÷ (1 + r)ᵗ), where r is the discount rate and t is the year (1, 2, 3 …).
Assumptions and limitations
Results depend heavily on the discount rate and cash-flow estimates. It assumes cash flows arrive at year-end and excludes risk and inflation beyond the chosen rate.
Worked example
At a 10% discount rate, an initial 1,000 with three yearly cash flows of 500 has a present value of about 1,243, giving an NPV of about 243.
How to use this tool
- Enter your discount rate and initial investment.
- List each future cash flow, one per line.
- Read the NPV and profitability index.
Common mistakes to avoid
- Including the initial investment again in the cash-flow list.
- Using a discount rate that does not reflect the project’s risk.
About the NPV Calculator
The NPV Calculator works out the net present value of an investment by discounting its future cash flows back to today and subtracting the initial outlay. A positive NPV means the project is expected to add value.
Who should use this tool
Anyone appraising a project or investment — business owners, finance students and analysts comparing options.
Benefits
- Turn future cash flows into a single present-value figure.
- See the profitability index and an accept/reject verdict.
- Visualise the discounted value of each year.
- Private — your figures never leave your browser.
Practical use cases
- Deciding whether a project is worth the upfront cost.
- Comparing two investments with different cash-flow timing.
- Checking the impact of a higher discount rate.
Frequently asked questions
What does a positive NPV mean?
It means the present value of the future cash flows is greater than the initial cost, so the investment is expected to add value at your chosen discount rate.
How is NPV different from IRR?
NPV gives a money amount at a chosen discount rate; IRR gives the single rate at which NPV would equal zero.