Net Present Value Calculator
Discount a series of future cash flows and compare them with an initial investment
Net present value
How we calculated it
About the Net Present Value Calculator
Net present value converts future cash flows into today’s value and subtracts the initial investment. It is useful for projects where cash arrives at different times and a simple ROI would ignore the time value of money.
The result depends heavily on the discount rate. A project can have positive NPV at one required return and negative NPV at a higher one.
How to Use the Net Present Value Calculator
- Enter the initial investment as a cash outflow.
- Enter each future cash flow in the period when it is expected.
- Enter the discount rate on the same period basis as the cash-flow timing.
- Calculate NPV and test another discount-rate scenario when the required return is uncertain.
How the Calculation Works
NPV = Σ[CF_t/(1+r)^t] − initial investment, where CF_t is the cash flow in period t and r is the periodic discount rate.
Each future cash flow is discounted separately because money received later has less present value at a positive discount rate.
Worked example
Net Present Value Calculator Worked Example
$10,000 investment returning $6,000 in years 1 and 2 at 10%
PV of year 1 = $6,000÷1.10 ≈ $5,454.55. PV of year 2 = $6,000÷1.10² ≈ $4,958.68. NPV ≈ $5,454.55+$4,958.68−$10,000 = $413.23.
Result guide
Understanding Your Net Present Value Calculator Result
A positive NPV means the modeled cash flows exceed the required return represented by the discount rate. A negative NPV means they fall short under that assumption.
Before you rely on the answer
Assumptions and Limitations
- Cash-flow amounts and timing are estimated consistently.
- Discount rate is appropriate for the project and period.
- Taxes, financing effects and terminal value are included only if entered.
Practical tip
Using This Result in Practice
Do not choose a discount rate merely to make the project look attractive. Use a rate grounded in opportunity cost and risk, then test sensitivity around it.
Related calculations
Useful Calculations to Continue With
If you want the discount rate that makes NPV equal zero, use the IRR Calculator.
If recovery time matters as well as value creation, use the Discounted Payback Period Calculator.
Common questions
Net Present Value Calculator FAQ
What does positive NPV mean?
Under the chosen discount rate, discounted inflows exceed the initial investment and other modeled outflows.
Why does a higher discount rate lower NPV?
Future cash flows are discounted more heavily, reducing their present value.
Is NPV better than simple payback?
For value measurement, NPV is more complete because it accounts for timing and all modeled cash flows, while payback focuses on recovery time.