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NPV Calculator

Calculate the net present value (NPV) of an investment by entering a discount rate and a series of cash flows. A positive NPV indicates a profitable investment.

Investment Details

Required rate of return or cost of capital
Upfront cost (entered as a positive number)
Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
Results update as you type.

How It Works

Net Present Value (NPV) calculates the total value of an investment by discounting future cash flows back to today's dollars:

NPV = ∑ (Cash Flowt ÷ (1 + r)t) − Initial Investment

Profitability Index (PI) measures the value created per dollar invested:

PI = Total Present Value of Cash Flows ÷ Initial Investment

Discounted Payback Period is the time it takes for cumulative discounted cash flows to recover the initial investment.

Understanding NPV

Decision Rule

  • NPV > 0 — Investment adds value; accept
  • NPV = 0 — Investment breaks even at the required rate
  • NPV < 0 — Investment destroys value; reject
  • PI > 1 — Returns exceed the cost of capital

When to Use NPV

  • Evaluating capital investment projects
  • Comparing mutually exclusive projects
  • Assessing business acquisitions
  • Deciding between lease vs. buy options

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