NPV calculator — net present value of a project's yearly cash flows

How to use the NPV calculator

1. Enter the Initial investment: the cost paid today (year 0).
2. Enter the Discount rate, the yearly return you require.
3. Type the Cash flow for each year (one per line), starting with year 1.
4. Pick a Currency.
5. Read Net present value, Present value of inflows, IRR and Decision at this rate, then check the Discounted cash flows table.

What it does and when to use it

Should you buy a machine that saves money for four years, open a second shop, or install solar panels? Each choice costs money now and pays back over several years. Adding up the future cash does not answer the question, because ₹45,000 in year 4 is worth less than ₹45,000 today. Net present value fixes that by discounting each year first.

The US government’s guidance for cost-benefit analysis, OMB Circular A-94, calls net present value the standard test for whether a program is justified: discount future benefits and costs, then subtract. Programs with a positive NPV are generally preferred and those with a negative NPV should generally be avoided. The same rule works for a household or small-business decision.

The IRR calculator gives the break-even rate for the same cash flows, and the payback period calculator shows how quickly the cost comes back. For a single future sum, the present value calculator is simpler.

How it works

The upfront cost is paid now and each cash flow arrives at the end of its year:

NPV = −C + CF₁ ÷ (1 + r) + CF₂ ÷ (1 + r)² + … + CFₙ ÷ (1 + r)ⁿ

• C is the initial investment.
• CFₜ is the cash flow in year t.
• r is the discount rate as a decimal.

The table lists each year’s Discount factor (1 ÷ (1 + r)ᵗ) and the Present value of that year’s cash flow. Present value of inflows is their total. The calculator also finds the IRR, the rate at which NPV would be exactly zero.

Worked examples

These figures come from the calculator’s own function.

A four-year project at 10%. Initial investment ₹1,00,000, cash flows ₹30,000, ₹35,000, ₹40,000 and ₹45,000. The discounted values are ₹27,272.73, ₹28,925.62, ₹30,052.59 and ₹30,735.61. Their total is ₹1,16,986.54, so the NPV is ₹16,986.54 and the verdict is “Adds value (NPV > 0)”. The IRR is 17.09%.

The same project at 20%. NPV becomes −₹5,844.91, “Destroys value (NPV < 0)”. Nothing about the project changed except the return you require. Because the IRR of 17.09% sits between 10% and 20%, the verdict flips somewhere in that range.

A one-year break-even. Invest $1,000 to receive $1,100 in a year, discounted at 10%. The present value of the inflow is exactly $1,000.00, so NPV is $0.00: break-even.

Limits and tips

• Yearly, end-of-year timing. All cash flows are treated as arriving at year-ends. Monthly flows need to be added up by year first.
• Estimates in, estimate out. NPV is only as good as the cash flow forecasts.
• Real or nominal. If your cash flows include expected inflation, use a nominal rate; if they are in today’s prices, use a real rate.
• Taxes are not deducted unless you enter after-tax cash flows.
• Everything runs in your browser.