NPV Calculator
Is the project worth more than it costs today?
NPV Calculator
Discount a stream of future cash flows back to today and see whether the project adds value.
Period 0 first — normally the negative initial outlay. Separate values with commas, spaces, or semicolons. Parentheses are read as negatives.
Your cost of capital or the return you could earn elsewhere at similar risk.
+1,698.65
Positive at this discount rate — the project clears the hurdle.
- PV of future inflows
- 11,698.65
- Initial outlay
- 10,000
- Profitability index
- 1.17
- Periods
- 4
| Period | Cash flow | Present value |
|---|---|---|
| 0 | -10,000 | -10,000 |
| 1 | 3,000 | 2,727.27 |
| 2 | 3,500 | 2,892.56 |
| 3 | 4,000 | 3,005.26 |
| 4 | 4,500 | 3,073.56 |
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What This Calculator Does
The NPV Calculator discounts a stream of future cash flows back to today at your chosen rate and reports the net present value. It also shows the present value of the inflows, the profitability index, and a period-by-period discounting table so you can see where the value comes from.
How It Works
Each cash flow is divided by one plus the discount rate raised to its period number. Period 0 is not discounted because it happens today. Summing the discounted values gives NPV. A positive NPV means the project returns more than the discount rate; a negative one means it destroys value at that rate.
Example
Invest 10,000 today and receive 3,000, 3,500, 4,000, and 4,500 over four years at a 10% discount rate. The discounted inflows total about 12,434, so NPV is roughly +2,434 and the profitability index is 1.24. The project clears a 10% hurdle.
Formula
NPV = Σ CFₜ / (1 + r)ᵗCF₀ is not discounted because it occurs at t = 0.
PI = PV of inflows / Initial outlayA PI above 1 is consistent with a positive NPV.
Reading the Results
Net present value
Value created or destroyed in today’s money at the chosen discount rate. Positive means acceptable if the rate is your true cost of capital.
Profitability index
Present value of inflows per unit invested. It helps rank projects of different sizes, where raw NPV favours larger ones.
Sources and References
CFA Institute — Capital Budgeting
NPV as the primary investment criterion
NPV is preferred over payback because it accounts for the time value of money and the scale of cash flows.
Brealey, Myers & Allen — Principles of Corporate Finance
Discounting at the opportunity cost of capital
The discount rate should reflect the return available on investments of comparable risk.
References identify the method or data behind this calculator. Where a standard or tariff changes, the current edition applies, and the assumptions stated above take precedence over a remembered figure.
Frequently Asked Questions
What discount rate should I use?
Your opportunity cost of capital: the return you could earn on an investment of similar risk. For a company project that is usually the weighted average cost of capital; for personal investing it is a realistic portfolio return.
What does a negative NPV mean?
At that discount rate the project returns less than the alternative. It does not automatically mean the idea is bad — the cash-flow assumptions or the rate may be wrong — but on those inputs it destroys value.
Why is the first cash flow not discounted?
Period 0 happens today, so its present value equals its nominal value. If your first outlay occurs a year from now, put a zero in period 0 and shift the series along.
Is NPV better than payback period?
Yes for investment decisions. Payback ignores everything after the break-even point and ignores the time value of money. NPV captures the full stream and discounts it, which is why it is the standard criterion.