NPV Calculator
Discount a project's future cash flows to find its net present value.
About the NPV Calculator
Enter the cash flows year by year, with the investment as a negative number in year 0, and your discount rate. The calculator gives the net present value, a table of each year's discounted cash flow, and the IRR when NPV is negative.
NPV adds up each cash flow divided by (1 + r)^t, where r is your required return or cost of capital. A positive NPV means the project returns more than r and adds value; negative means it doesn't cover the cost of the money tied up.
The formula
NPV = Σ CFₜ ÷ (1 + r)ᵗ
Worked example
Invest 100,000; receive 30,000, 35,000, 40,000 and 45,000 over four years; 10% discount rate
- Discounted: 27,273 + 28,926 + 30,053 + 30,736 = 116,987
- NPV = 116,987 − 100,000 = 16,987
- Positive, so the project beats a 10% return
Questions people ask
Which discount rate?
Your cost of capital (WACC) or the return on an alternative of similar risk.
Excel's NPV function?
It discounts the first value too; add year 0 separately.
NPV or payback?
NPV counts every cash flow and the time value of money; payback only says how fast the cost comes back.