10% discount, $10k spend, 3 years of $4k
- NPV ≈ $−192 (slightly negative)
finance calculator
Net Present Value (NPV) Calculator
Discount projected cash flows to today’s dollars and see whether a project creates value.
Results
- Net present value
- $308
How to use this calculator
- Enter a discount rate (annual).
- Enter the initial investment (upfront outlay).
- Enter up to four future cash flows.
- Review NPV to see if the project beats the discount rate.
Inputs explained
- Discount rate %
- Required return or hurdle (annual).
- Initial investment
- Upfront cost; treated as an outflow in the NPV math.
- Year 1–4 cash flows
- Projected net cash flows each year; can be negative for CapEx or losses.
How it works
NPV = −Initial investment + Σ (cash flow / (1 + rate)^t). Positive values indicate the project beats the discount rate.
Formula
NPV = −I₀ + Σ (CFₜ ÷ (1 + r)^t)
When to use it
- Screening projects, products, or properties against a hurdle rate.
- Comparing uneven cash flow profiles when ROI/payback is misleading.
- Running sensitivity by adjusting discount rates or individual cash flows.
Tips & cautions
- Include negative cash flows for future CapEx or working capital needs.
- Use a discount rate that reflects project risk and cost of capital.
- If you have more than four years, approximate a terminal value or use a spreadsheet for longer horizons.
- Supports four annual cash flows; longer timelines require a spreadsheet or terminal value approximation.
- Assumes end-of-year timing and a constant discount rate.
- Taxes, financing, and working capital are not modeled unless included in cash flows.
Worked examples
8% discount with same cash flows
- NPV ≈ $165 positive
Deep dive
This NPV calculator discounts future cash flows at your chosen rate and subtracts the upfront investment. Enter discount rate, initial spend, and yearly cash flows to see if the project creates value.
Use it to compare capital projects or deals with uneven cash flows. Add negative flows for future CapEx and consider a terminal value for horizons beyond four years.
FAQs
- What discount rate should I use?
- Use your weighted average cost of capital (WACC) or opportunity cost of capital. For personal projects, use expected investment returns.
- Can I add more years?
- Duplicate the cash-flow inputs or move the calculation to a spreadsheet for longer timelines.
- How is NPV different from ROI or payback?
- NPV discounts timing and risk via the rate, while ROI/payback ignore time value and uneven timing.
- Does sign convention matter?
- Yes. The tool treats the initial investment as an outflow and cash flows as inflows unless you enter them negative.
- Can I include a terminal value?
- Yes—add it to the final year’s cash flow to approximate value beyond the modeled period.
Related calculators
Assumes cash flows occur annually at period-end. Adjust for mid-year or monthly timing if needed.