NPV Calculator

Calculate net present value of an investment's cash flows

About NPV Calculator

NPV (Net Present Value) measures whether an investment is expected to create or destroy value by converting all future cash flows into today's dollars and subtracting the initial cost. A positive NPV means the investment is expected to add value; a negative NPV means it's expected to cost more than it returns.

Formula

NPV = −Initial Investment + Σ [Cash Flow_t / (1 + discount rate)^t]

How It Works

Enter your initial investment (the upfront cost, treated as a cash outflow)
Enter your discount rate — typically your cost of capital (WACC) or required rate of return
Enter the expected cash flow for each future year of the investment
Each future cash flow is discounted back to its present value, then summed and reduced by the initial investment to get NPV

Examples

Calculation	Expression	Result
$100k investment, 10% rate	3 years of $40k cash flows	NPV ≈ −$526
Positive NPV example	$50k investment, $20k/yr × 4yr at 8%	NPV ≈ +$16,243

Tips

A positive NPV means the investment is expected to earn more than your discount rate (cost of capital) and add value; a negative NPV means it falls short
The discount rate you choose changes the result significantly — a higher discount rate reduces the present value of future cash flows more heavily
NPV directly compares different-sized or different-length investments in dollar terms, unlike percentage-based metrics like IRR

Frequently Asked Questions

What does a positive vs. negative NPV mean?

A positive NPV means the investment's future cash flows, discounted back to today, are worth more than the initial cost — it's expected to add value. A negative NPV means the opposite — the investment is expected to destroy value at that discount rate.

What discount rate should I use for NPV?

Most commonly a company's WACC (weighted average cost of capital), or an individual investor's required rate of return — the discount rate represents the minimum return needed to justify the investment given its risk.

Why does NPV discount future cash flows?

Money available today is worth more than the same amount in the future, since it could be invested and grow in the meantime — discounting converts future cash flows into their equivalent value in today's dollars for a fair comparison.

How is NPV different from IRR?

NPV gives a dollar amount showing how much value an investment is expected to add at a specific discount rate. IRR gives a percentage — the discount rate at which NPV would equal exactly zero. NPV is generally preferred for comparing investments of different sizes, since IRR can be misleading when comparing projects with very different scales.

Can NPV compare two different investment options?

Yes — calculate the NPV of each option at the same discount rate, and the option with the higher NPV is expected to create more value, assuming comparable risk levels between the two options.