Net Present Value (NPV) Calculator

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Understanding NPV

Net Present Value (NPV) is a core concept in finance that translates the value of future cash flows into today's dollars. It helps you answer the question: "Is the future profit from this investment worth more than what I'm paying for it today?"

How to Use This Tool

  • Discount Rate: This is your required rate of return or the interest rate you could earn on an alternative investment (e.g., 10%).
  • Initial Investment: Enter the total upfront cost of the project as a positive number.
  • Cash Flows: Enter the expected income for each year.

Interpreting the Result

  • Positive NPV (> 0): The investment is expected to be profitable and should be accepted.
  • Negative NPV (< 0): The investment is expected to result in a net loss and should be rejected.
  • Zero NPV (= 0): The investment will earn a return exactly equal to the discount rate.
While NPV gives an absolute value, the IRR Calculator provides a percentage rate of return. Many analysts use both. Learn more in our guide: IRR vs. NPV.

Net Present Value (NPV):

$0.00

Frequently Asked Questions (FAQ)

What is Net Present Value (NPV)? ▼

Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment. It calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time. A positive NPV indicates that the projected earnings (in today's dollars) exceed the anticipated costs.

What is the NPV Formula? ▼

The standard formula for NPV is:

NPV = ∑ [Rt / (1+i)^t] - C0

  • Rt: Net cash inflow during the period t
  • i: Discount rate or return that could be earned in alternative investments
  • t: Number of time periods
  • C0: Total initial investment cost
What is the difference between NPV and IRR? ▼

Both metrics are used in capital budgeting, but they tell different stories:

  • NPV gives you a dollar value. It tells you exactly how much value a project adds to the firm.
  • IRR gives you a percentage return. It tells you the breakeven interest rate.

Generally, NPV is considered superior for mutually exclusive projects because it accounts for the scale of the investment.

Read more: IRR vs NPV →

What is a "Good" NPV? ▼

Theoretically, any NPV > 0 is "good" because it means the investment is expected to generate more value than the cost of capital. However, in practice, companies often look for a significant positive NPV to justify the risk and effort.