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Investment Decision Calculator
Evaluate an investment using NPV, IRR, discounted payback, and profitability index from simple cash flow assumptions.
NPV, IRR, and payback answer different decision questions. A small dashboard view helps you avoid relying on a single metric.
This calculator uses a simple constant annual cash flow stream and computes NPV, IRR (if it exists), discounted payback, and profitability index.
Prefer an explanation- Read the guide.
Investment decision metrics: NPV vs IRR vs payback vs PICapital budgeting hub: NPV, IRR, payback, and investment decisionsNPV vs IRR: which metric to trust (and the traps)Discount rate: how to choose it for NPV and DCF
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Tip: you can type commas (e.g., 10,000).
Example
Using the default inputs, the result is:
$69,506.69
- Initial investment (upfront)
- $100,000
- Annual cash flow
- $30,000
- Years
- 10
- Discount rate (MARR)
- 12%
How to calculate
- Enter the initial investment (upfront cash outflow).
- Enter annual cash flow and number of years to evaluate.
- Enter discount rate (MARR / required return).
- Review NPV, IRR, payback, and PI together to make a balanced decision.
Formula
NPV = -I + sum(CF_t/(1+r)^t); IRR solves NPV(r)=0; PI = PV(inflows)/I; Discounted payback is when cumulative PV >= I
- Cash flows are annual and occur at the end of each year (except the upfront investment at t=0).
- Uses a constant annual cash flow for simplicity.
- IRR is approximated via bisection and may be undefined for some patterns.
FAQ
Which metric should I trust most-
NPV is usually the best decision metric at a chosen required return because it measures value created in dollars. Use IRR for intuition and comparison, and use payback/PI as constraints or secondary lenses.
What does profitability index mean-
PI normalizes value by investment: PI > 1 means positive NPV. It's useful when capital is constrained and you want value per dollar invested.
Common mistakes
- Using IRR alone (can mislead with non-standard cash flows).
- Using simple payback without discounting (ignores time value).
- Comparing projects of different scale without normalizing (use PI and NPV).
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NPV Calculator
Calculate net present value (NPV) from initial investment, annual cash flow, years, and discount rate.
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IRR Calculator
Estimate internal rate of return (IRR) for an investment using yearly cash flows.
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Discounted Payback Period Calculator
Estimate discounted payback period using a discount rate (and compare to simple payback).
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Cash Runway Calculator
Estimate runway from cash balance, revenue, gross margin, and operating expenses (optionally with revenue growth).
Quick checks
- Use consistent time units (monthly vs annual) when entering rates and cash flows.
- Run a sensitivity check on the input that drives the result most (often discount rate or growth).
- Treat the output as a decision aid, not a prediction; validate assumptions with reality.