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
$
$
%
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).
Related calculators
Finance
Deferred Revenue Rollforward Calculator
Bridge billings to recognized revenue by rolling deferred revenue forward for a period.
Finance
Break-even Revenue Calculator
Estimate the revenue needed to break even given fixed costs and gross margin.
Finance
NPV Calculator
Calculate net present value (NPV) from initial investment, annual cash flow, years, and discount rate.
Finance
IRR Calculator
Estimate internal rate of return (IRR) for an investment using yearly cash flows.
Finance
Discounted Payback Period Calculator
Estimate discounted payback period using a discount rate (and compare to simple payback).
Finance
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.