Net present value is the gold standard for investment decisions. A positive NPV means the investment earns more than your required return and adds value; a negative NPV destroys value.
How to use the NPV Calculator – Net Present Value
- Discount rate
- Initial investment
- Cash flows for year 1, 2, 3 …
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the discount rate, the initial investment and the cash flow for each year.
Tips
- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.
Common mistakes to avoid
- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).
Inputs explained
| Field | What to enter |
|---|---|
| Discount rate | In % |
| Initial investment | Amount in your currency |
| Cash flows for year 1, 2, 3 … | A list of numbers separated by commas, spaces or new lines |
What each result means
- Present value of future cash flows = [Net present value (NPV)]([Discount rate]÷100, [Cash flows for year 1, 2, 3 …])
- Net present value (NPV) = [Present value of future cash flows] – [Initial investment]
- Undiscounted net cash flow = sum([Cash flows for year 1, 2, 3 …]) – [Initial investment]
- IRR = [IRR](0 – [Initial investment], [Cash flows for year 1, 2, 3 …])×100
Example values
How the main result changes when Discount rate changes and everything else stays at the example values above:
| Discount rate (%) | Net present value (NPV) |
|---|---|
| 5 | 18,790.03 |
| 7.5 | 14,056.46 |
| 10 | 9,803.54 |
| 12.5 | 5,970.33 |
| 15 | 2,504.95 |
| 20 | -3,493.44 |
Formula
NPV = Σ CFₜ ÷ (1 + r)^t − initial investmentAccept if NPV > 0Worked example
Inputs — Discount rate: 10 %; Initial investment: $50,000; Cash flows for year 1, 2, 3 …: 12000, 15000, 18000, 20000, 15000.
Results — Present value of future cash flows = $59,803.54; Net present value (NPV) = $9,803.54; Undiscounted net cash flow = $30,000.00; IRR = 16.97 %; Decision = Accept – positive NPV.
Frequently asked questions
What is NPV?
The present value of future cash flows minus the initial investment.
What discount rate should I use?
Your cost of capital or required rate of return.
What does a positive NPV mean?
The project earns more than the required return.
What formula does the NPV Calculator – Net Present Value use?
NPV = Σ CFₜ ÷ (1 + r)^t − initial investment.