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NPV Calculator
Calculate net present value (NPV) from initial investment, annual cash flow, years, and discount rate.
NPV (net present value) measures how much value a project creates after discounting future cash flows back to today's dollars.
A positive NPV means the project beats your required return (discount rate). A negative NPV means it fails the hurdle rate.
Prefer an explanation- Read the guide.
NPV (Net Present Value): definition, formula, and exampleDiscount rate: how to choose it for NPV and DCFIRR (Internal Rate of Return): definition, formula, and how to use itNPV vs IRR: which metric to trust (and the traps)
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$
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Used to estimate required annual cash flow.
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Tip: you can type commas (e.g., 10,000).
Example
Using the default inputs, the result is:
$8,143.29
- Initial investment (upfront)
- $100,000
- Annual cash flow
- $30,000
- Years
- 5
- Discount rate
- 12%
- Target NPV (optional)
- $0
How to calculate
- Enter the upfront investment (time 0 cash outflow).
- Enter annual cash flow, the number of years, and a discount rate (required return).
- Review NPV and the present value (PV) of cash flows.
- Use sensitivity: the same project can flip from positive to negative as the discount rate changes.
Formula
NPV = sum_{t=1..n} cash_flow_t / (1 + r)^t - initial investment (annuity PV for constant cash flow)
- Assumes constant annual cash flow (real projects vary).
- Discount rate reflects required return (hurdle rate / MARR).
Benchmarks
- NPV > 0: creates value at the chosen discount rate.
- NPV = 0: break-even at the chosen discount rate (meets the hurdle rate).
- Profitability index (PV / investment) helps compare projects of different sizes.
FAQ
What discount rate should I use-
Use your required return or hurdle rate (often called MARR). Many teams test a range (e.g., 8%-20%) to see sensitivity.
NPV vs IRR-
NPV is value created at a chosen discount rate. IRR is the implied discount rate where NPV equals zero.
Common mistakes
- Using nominal cash flows with a real discount rate (inflation mismatch).
- Ignoring working capital timing or terminal value when they are material.
- Using a single discount rate without testing a range of outcomes.
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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.