NPV Calculator
Net present value discounts every future cash flow back to what it is worth today and subtracts what the project costs up front. A positive NPV means the project beats the return you asked for; a negative one means your money does better elsewhere. Enter the upfront cost, the cash flows year by year, and your required rate to see the NPV alongside the internal rate of return and the discounted payback period.
- Accurate
- Real-time
- Easy to use
- 100% free
Net present value
$29,079
Discounted payback
3.96 years
Details
Updates as you typeWhat the project costs today, at year 0. Enter it as a positive number.
Separate the years with commas, spaces or semicolons, in order. A year that loses money can be negative or in brackets.
Your hurdle rate or cost of capital — what this money would earn elsewhere at the same risk.
Summary
Strong — 1.25 to 2.0Net present value
$29,079
Present value of the returns
$129,079
- Present value of the costs$100,00077%
- Net present value$29,07923%
- Internal rate of return
- 19.71%
- Discounted payback
- 3.96 years
- Simple payback (undiscounted)
- 3.25 years
- Present value of the returns
- $129,079
- Present value of the costs
- $100,000
- Profitability index
- 1.291
- Undiscounted net cash flow
- $75,000
- Value lost to discounting
- $45,921
- Years of cash flow
- 5
- The project earns 19.71% a year, 9.71 percentage points above the 10% you require, which is why the NPV is positive.
- Cash flows are assumed to arrive at the end of each year, and the discount rate is assumed to hold for the whole horizon. Change either assumption and the NPV moves.
How this is calculated
- Upfront investment (year 0)
- -$100,000
- Discount rate
- 10.00%
- Years of cash flow
- 5
- Year 1 cash flow, discounted 1 year
- $22,727
- Year 2 cash flow, discounted 2 years
- $24,793
- Year 3 cash flow, discounted 3 years
- $26,296
- Year 4 cash flow, discounted 4 years
- $27,321
- Year 5 cash flow, discounted 5 years
- $27,941
- Present value of every future year
- $129,079
- Less the upfront investment
- -$100,000
- Net present value
- $29,079
- Internal rate of return (the rate where NPV is 0)
- 19.71%
Discount rate (%)
Compare scenarios
See how one change moves the result
- CurrentYour inputs as they stand$29,079Current
- Upfront investment$ 125,000$4,079
- Required rate of return% 12.5$20,451
For informational purposes only. This is not financial advice — confirm major decisions with a licensed advisor.
Frequently asked questions
How is net present value calculated?
Each future cash flow is divided by (1 + r) raised to the power of the year it arrives, where r is your required rate of return, and the results are added up. The upfront investment is then subtracted, because it is spent today and needs no discounting. A $100,000 project paying $25,000, $30,000, $35,000, $40,000 and $45,000 over five years is worth $129,079 in today’s money at a 10% required return, so its NPV is $29,079.
What does the internal rate of return tell me that NPV does not?
The IRR is the discount rate at which the NPV would be exactly zero — in other words, the annual return the project actually earns. NPV tells you how much value a project creates in dollars, which depends on how big it is; IRR tells you the rate, which lets you compare it against your cost of capital or against a completely different opportunity. Use both: NPV to decide whether to go ahead, IRR to understand the margin of safety.
Why does this sometimes say the IRR is undefined or ambiguous?
Because it genuinely can be. NPV is a polynomial in the discount factor, so it can cross zero as many times as the cash flows change direction. A project that needs a second injection of money part-way through can have two or more rates that each set NPV to zero, and no one of them is more the IRR than another. A project whose cash flows never turn NPV positive has none at all. In either case this calculator says so rather than printing one arbitrary root as if it were the answer.
What is the discounted payback period?
It is the point at which the cumulative discounted cash flows first cover the upfront investment — how long your money is genuinely at risk, in today’s dollars. It is always longer than the simple payback period, which ignores the time value of money entirely, and the gap between the two is a good measure of how much the discount rate is really costing you.
What discount rate should I use?
Use the return you could get on an alternative of similar risk. For a company that is usually its weighted average cost of capital; for a personal project it might be what an index fund or a bond would pay. Raising the rate always lowers the NPV, and the rate at which NPV hits zero is the IRR — so if you are unsure, check whether your decision would change anywhere within the range you think plausible.
Can I use periods other than years?
Yes, as long as the rate matches the period. If your cash flows are quarterly, enter a quarterly discount rate rather than an annual one — roughly the annual rate divided by four, or precisely (1 + annual)^(1/4) − 1. The labels here say years, but the arithmetic only cares that each cash flow is one period further away than the last.