Net Present Value (NPV) Calculator

Net Present Value answers one practical question: after adjusting for the fact that a dollar received next year is worth less than a dollar in hand today, does this investment leave you richer or poorer? The calculation above converts every future cash flow into today's dollars using your discount rate, then subtracts what you had to spend to get them. A positive result means value created; a negative result means the project costs more, in present-day terms, than it returns.

The Formula This Calculator Runs

NPV = Σ [CF_t / (1 + r)^t] − Initial Investment, where CF_t is the cash flow received in period t, r is the discount rate, and each term is discounted back by however many periods have passed.

A Worked Example, Using the Calculator's Own Starting Numbers

Load the calculator above with its defaults — a $10,000 initial investment, an 8% discount rate, and five years of cash flows of $2,000, $3,000, $4,000, $5,000, and $3,000 — and here is exactly what happens to each cash flow on the way to becoming an NPV:

Because $3,316.10 is positive, this project is worth taking on at an 8% discount rate — you can confirm this by entering these exact five numbers into the calculator above.

NPV vs. IRR: When the Two Metrics Agree, and When They Don't

For a single, conventional project — one upfront outflow followed by positive inflows — NPV and IRR almost always point the same direction: if NPV is positive at your chosen discount rate, the IRR will sit above that rate too, and the calculator's recommendation and IRR figure will agree. Our IRR Calculator finds the exact discount rate at which NPV for the same cash flows would equal zero.

The two metrics can disagree once you're ranking mutually exclusive projects of different sizes. A small project can post a very high IRR — say 40% on a $5,000 outlay — while creating far less dollar value than a larger project earning a lower 12% IRR on a $500,000 outlay but a much bigger NPV. When capital is limited and you're choosing between competing projects, the NPV figure — actual dollars of value created — should usually outrank the IRR percentage. If you also need to weigh costs and benefits that aren't purely financial, the Cost-Benefit Analysis Calculator is a useful companion tool for that broader comparison.

Frequently Asked Questions

Q: My project's cash flows go negative, then positive, then negative again. Does NPV still work?
A: Yes — NPV sums discounted cash flows regardless of sign pattern, so irregular flows like a mid-project renovation cost don't break it. IRR can produce multiple valid answers, or none, once cash flows change sign more than once.

Q: How much does the discount rate actually matter?
A: A lot. Using the worked example above, raising the rate from 8% to 12% drops the NPV from $3,316.10 to $1,904.29, because distant cash flows lose more value at higher rates. Test a range of rates rather than committing to one guess.

Q: If NPV is positive, is the project automatically worth doing?
A: Not necessarily — it only means the project beats your discount rate. If capital is limited and you're choosing among several positive-NPV projects, compare the Profitability Index in your results to see which uses capital most efficiently.

Q: Should every project use the same discount rate?
A: No. Match the rate to the risk of the specific cash flows — a predictable, contracted revenue stream warrants a lower rate than a speculative new venture, even inside the same organization.