Net Present Value (NPV) Calculator
Is a project worth doing at your required rate of return?
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Net Present Value (NPV) Calculator by TheCalcTools
How the Net Present Value (NPV) Calculator works
Enter the upfront cost, your discount rate and the expected cash flow for each of five years.
Each cash flow is discounted back to today.
NPV is the present value of the inflows minus the initial investment.
The formula
Worked example
Using the default values shown in the calculator:
| Initial investment | $50000 |
|---|---|
| Discount rate (%) | 8 % |
| Cash flow, year 1 | $15000 |
| Cash flow, year 2 | $15000 |
| Cash flow, year 3 | $15000 |
| Cash flow, year 4 | $15000 |
| Cash flow, year 5 | $15000 |
- PV of $15,000 a year for 5 years at 8% = $59,890.65.
- NPV = $59,890.65 − $50,000 = $9,890.65.
- Profitability index 1.198: Accept: NPV is positive.
Result:
| Net present value | $9,890.65 |
|---|---|
| Present value of cash flows | $59,890.65 |
| Profitability index | 1.198 |
| Decision | Accept: NPV is positive |
Frequently asked questions
What does a positive NPV mean?
The project is expected to earn more than your required rate of return, so it adds value.
How is it different from IRR?
NPV gives the value created in money terms at a chosen rate. IRR is the rate at which NPV is zero.
Sources and further reading
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This calculator gives estimates for information only. It is not financial advice, and your lender's or provider's figures will govern. Rates, fees and rules vary. See our disclaimer.