NPV Calculator
This NPV calculator finds the net present value of an investment's cash flows at your chosen discount rate — the dollar amount of value the investment creates (or destroys) once every future cash flow is translated into today's terms. Enter your cash flows and required rate of return to see the result.
The upfront amount invested — entered as a positive number, treated as an outflow.
Net cash received in year 1 — 0 if none.
Net cash received in year 2.
Net cash received in year 3.
Net cash received in year 4.
Net cash received in year 5 — 0 if the project ends earlier.
Your required rate of return, or cost of capital.
Net present value (NPV)
$22,559
Positive means the investment creates value at this discount rate; negative means it destroys value.
How to use this npv calculator
- 1Initial investment and year 1-5 cash flows: the same inputs as the IRR calculator — enter 0 for any year with no cash flow.
- 2Discount rate: your required rate of return, or cost of capital — the minimum return you'd need to make this worthwhile compared to your best alternative.
Understanding your results
Net present value is the single most direct answer to 'does this investment create value?' — a positive NPV means the investment is worth more than it costs, at your chosen discount rate; a negative NPV means it isn't, even if the raw undiscounted cash flows look attractive.
The formula
NPV = Σ (Cash flow in year t) ÷ (1 + Discount rate)^t, for t = 0 to 5Each year's cash flow is discounted back to today's value by dividing by one plus the discount rate, raised to the power of how many years away it occurs — cash further in the future is worth less today, and a higher discount rate shrinks it more aggressively. Summing every discounted cash flow (with the initial investment counted as a negative outflow at year 0) gives the NPV.
A worked example
The same $100,000 investment returning $25,000, $30,000, $35,000, $35,000 and $40,000 over 5 years, discounted at a 10% required rate of return, has a positive NPV — meaning the investment clears the 10% hurdle and creates real value beyond simply returning your capital plus 10% a year. A higher required discount rate (say 20%) could turn the same cash flows into a negative NPV.
Notes for the UK, US and India
NPV is generally considered more reliable than IRR for comparing investments of different sizes, since it expresses value creation in actual dollars rather than a percentage rate. The discount rate you choose matters enormously — a higher rate penalizes cash flows further in the future more heavily, which is why picking a realistic, defensible rate is the most important judgment call in an NPV analysis.
Frequently asked questions
What discount rate should I use?+
Your realistic cost of capital or required rate of return — for a business, often the weighted average cost of capital (WACC); for a personal investment decision, your realistic alternative investment return.
Is a positive NPV always a 'go' decision?+
It means the investment clears your required return at your chosen discount rate — a strong signal, but real decisions often also weigh risk, strategic fit, and cash flow assumptions' reliability beyond the single NPV number.
How is NPV different from IRR?+
NPV gives a dollar amount of value created at a chosen discount rate; IRR gives the rate at which that value is exactly zero. NPV is generally preferred for comparing investments of different sizes, since IRR (a percentage) can favor a smaller, higher-rate project over a larger, more valuable one.
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