Net Present Value Calculator
Discounted value of future cash flows.
Reviewed by James Whitfield · Updated 24 October 2026 · How we check our maths
Your values
ⓘ Live results
- Net present value
- $17,395.86
- Present value of inflows
- $97,395.86
- Verdict
- Accept — creates value
- Profitability index
- 1.22
- Undiscounted total
- $130,000.00
Quick answer
Net present value (NPV) is the sum of each future cash flow divided by (1 + discount rate) raised to its year, minus the upfront cost. A positive NPV means the investment earns more than your required return. Spending $80,000 to receive $20,000, $25,000, $30,000, $30,000 and $25,000 over five years, discounted at 10%, gives inflows worth $97,395.86 today and an NPV of $17,395.86.
What the Net Present Value calculator does
This calculator discounts a series of yearly cash flows back to today at the rate you choose, subtracts the initial investment and tells you whether the project adds value. It also reports the present value of the inflows, the undiscounted total and the profitability index (present value of inflows ÷ cost).
NPV is the textbook decision rule for capital budgeting: business projects, equipment, property, energy upgrades or any choice where you pay now and get paid later. Choose the discount rate carefully, because it drives the answer. Companies typically use their weighted average cost of capital; individuals can use the return they would otherwise earn on the money.
The calculator assumes the investment is paid today and every cash flow arrives at the end of its year. Enter net cash flows after operating costs and taxes, and include any salvage or sale value in the final year.
The formula
NPV = CF₁ ÷ (1 + r)¹ + CF₂ ÷ (1 + r)² + … + CFₙ ÷ (1 + r)ⁿ − C₀
| Symbol | Meaning | Unit |
|---|---|---|
| CFₜ | Net cash flow received at the end of year t | $ |
| r | Discount rate (required return) as a decimal | per year |
| n | Number of years of cash flows | years |
| C₀ | Initial investment paid today | $ |
This is the discounted cash flow method found in every corporate finance textbook (for example Brealey, Myers and Allen, *Principles of Corporate Finance*). The profitability index is PV of inflows ÷ C₀; above 1.0 means positive NPV.
Note that Excel's NPV() function assumes the first value is one period away, so add the initial investment separately, as this calculator does. NPV is less reliable when the right discount rate is genuinely uncertain or when cash flows arrive at irregular dates (use XNPV for that).
Worked examples
Expansion project at a 10% hurdle rate
A company spends $80,000 on a new product line expected to generate $20,000, $25,000, $30,000, $30,000 and $25,000 over five years. Its cost of capital is 10%.
Inputs
- Initial investment80000 $
- Discount rate10 %
- Yearly cash flows20000, 25000, 30000, 30000, 25000
Result
- Net present value$17,395.86
- Present value of inflows$97,395.86
- VerdictAccept — creates value
- Profitability index1.22
- Undiscounted total$130,000.00
NPV is $17,395.86 and the profitability index is 1.22, so each dollar invested returns $1.22 in today's money. The project clears the hurdle with room to spare.
Same project at a higher required return
The same cash flows, but the project is riskier than the company's average so management demands 15%.
Inputs
- Initial investment80000 $
- Discount rate15 %
- Yearly cash flows20000, 25000, 30000, 30000, 25000
Result
- Net present value$5,602.40
- Present value of inflows$85,602.40
- VerdictAccept — creates value
- Profitability index1.07
- Undiscounted total$130,000.00
NPV falls to $5,602.40: still positive, but most of the cushion is gone. If cash flows come in 10% below forecast, the project would no longer pay its way.
Home solar panels
A homeowner pays $18,000 (after incentives) for solar panels expected to cut electricity bills by $2,200 a year. They count only 10 years of savings and discount at 5%, the rate they earn on savings.
Inputs
- Initial investment18000 $
- Discount rate5 %
- Yearly cash flows2200, 2200, 2200, 2200, 2200, 2200, 2200, 2200, 2200, 2200
Result
- Net present value-$1,012.18
- Present value of inflows$16,987.82
- VerdictReject — destroys value
- Profitability index0.94
- Undiscounted total$22,000.00
Over 10 years NPV is −$1,012.18 even though undiscounted savings total $22,000. Panels typically last well beyond 10 years, so adding years 11–20 to the list would likely turn the answer positive.
Reading the result
NPV answers one question: does this investment beat the return you require? The sign of the result, and the profitability index alongside it, give the decision.
| Result | Meaning | Decision |
|---|---|---|
| NPV > 0 (PI > 1.0) | Returns exceed the discount rate | Accept, if no better use of capital |
| NPV = 0 (PI = 1.0) | Returns exactly equal the discount rate; the rate is the project's IRR | Indifferent |
| NPV < 0 (PI < 1.0) | Returns fall short of the discount rate | Reject, or rework the plan |
| Several positive NPVs, limited budget | Can't fund them all | Rank by profitability index or total NPV per dollar of scarce capital |
How the discount rate changes NPV
Raising the discount rate shrinks the value of distant cash flows more than near ones, so long projects are most sensitive. In the first example, moving from 10% to 15% cut NPV by about two-thirds. The rate at which NPV hits exactly zero is the project's internal rate of return.
- Business decisions: start from the company's WACC, then add a premium for projects riskier than the core business.
- Personal decisions: use the after-tax return you would get on the money otherwise, such as a savings rate for low-risk choices or an expected stock-market return for risky ones.
- Inflation: if cash flows are in today's dollars (no price increases built in), use a real discount rate; if they include expected price rises, use a nominal rate. Mixing the two is a common error.
Common NPV mistakes
- Including sunk costs already spent, which do not change with the decision.
- Forgetting working capital: money tied up in inventory or receivables is an outflow at the start and comes back at the end.
- Counting financing costs in the cash flows and also discounting at a rate that already reflects the cost of debt, which double-counts interest.
- Ignoring the terminal value of a long-lived asset, which understates NPV (as in the solar example).
- Treating a positive NPV as certain: test pessimistic cash flows and compare with the payback period to see how long your money is at risk.
How to use the Net Present Value Calculator
- 1Enter the upfront investment as a positive dollar amount, including installation and setup.
- 2Enter your discount rate in percent: your cost of capital or the return you would otherwise earn.
- 3List each year's net cash flow in order, separated by commas; use a minus sign for any year with a net cost.
- 4Read the NPV and verdict, then try a higher rate and lower cash flows to test how robust it is.
Frequently asked questions
What does a negative NPV mean?
It means the investment returns less than your discount rate, so you would be better off putting the money in the alternative the rate represents. It does not necessarily mean you lose money in cash terms.
Is NPV better than IRR?
For choosing between projects, yes: NPV measures value in dollars and handles different sizes and unusual cash-flow patterns correctly. IRR is useful as an easy-to-communicate percentage alongside it.
What is the difference between NPV and present value?
Present value is what future money is worth today; NPV subtracts what you pay to get it. The present value calculator handles a single future sum or a level stream of payments.
What discount rate should a small business use?
Many small businesses use their borrowing rate plus a few percentage points for risk, or the return the owners expect on their equity. Whatever rate you choose, apply it consistently across the options you are comparing.
References
- Principles of Corporate Finance — Brealey, Myers and Allen (McGraw Hill)
- CFA Program Curriculum – Capital Budgeting — CFA Institute
About this calculator
- Built and reviewed by James Whitfield · How we build and test calculators
- Last reviewed: October 24, 2026
- Report an error