NPV Calculator
Net present value of a stream of cash flows.
Details
what you put in at the start (Year 0)
required rate of return
Cash flow by year
Up to 40 years.
Net present value
-$45
Negative (the return falls short of your discount rate)
Internal rate of return (IRR)
9.76%
Total inflows
$12,200
This discounts a series of future cash flows back to today's value and subtracts the initial investment, giving the net present value.
A positive NPV means the project earns more than your required rate of return; a negative one means it does not.
What net present value means
Net present value answers one question: is this investment worth more than it costs, once you account for the fact that future money is worth less than money today?
A dollar next year is not worth a dollar now. You could have invested that dollar, so waiting has a cost. NPV puts every future cash flow back into today's terms and then subtracts what you have to pay upfront.
The rule is simple. Positive NPV means take it, because the project beats your required return. Negative means do not, because your money would do better elsewhere. Zero means it exactly meets your hurdle and nothing more.
The raw cash received is $150,000, but discounted it is worth $113,724 today. The whole difference is the cost of waiting.
What to enter
- Initial investment
- What you pay upfront, entered as a negative cash flow at time zero.
- Cash flows
- What the project returns in each period. They do not have to be equal, and any of them can be negative.
- Discount rate
- Your required rate of return. This single input decides the answer, so it deserves more thought than it usually gets.
- Number of periods
- Usually years. Keep the rate and the periods on the same basis: a monthly analysis needs a monthly rate.
NPV and its neighbours
- NPV
- A dollar amount of value created. Directly comparable between projects of different sizes.
- [IRR](/financial/irr-calculator)
- The discount rate at which NPV is zero. A percentage, which is intuitive, but it hides project size.
- [Present value](/financial/present-value-calculator)
- The discounted inflows on their own, before the initial investment is subtracted.
- Payback period
- How long until you recover your outlay. Simple, and it ignores the time value of money entirely.
What this assumes
Cash flows are assumed to arrive as forecast. Any NPV is only as reliable as the forecast underneath it.
One constant discount rate is applied throughout, which is a simplification for projects whose risk changes over time.
How to calculate net present value
Discount each cash flow by the number of periods you wait for it, add them up, then subtract the initial cost.
- Cₜ
- Cash flow in period t
- r
- Discount rate as a decimal
- t
- The period number, which is the power you divide by
- C₀
- Initial investment
Choose a discount rate. Your cost of capital, or the return you could get on a comparable alternative. Riskier projects should carry a higher rate.
Discount each cash flow. Divide by (1 + r) raised to the period number. Year 3 at 10% is divided by 1.331.
Add the discounted values. That total is the present value of everything the project returns.
Subtract the initial investment. What remains is the NPV. Positive means the project creates value beyond your required return.
See a worked example: the same project at two discount rates
- Investment
- $100,000 today
- Returns
- $30,000 a year for 5 years
At a 10% discount rate: the five inflows are worth $113,724 today, so NPV = $113,724 − $100,000 = $13,724. Take it.
At a 20% discount rate: they are worth only $89,718, so NPV = −$10,282. Do not take it.
Identical cash flows, opposite decisions. The discount rate is doing all the work.
The rate where NPV crosses zero is 15.24%, and that is the project's IRR.
$13,724 at 10%, −$10,282 at 20%
Frequently asked questions
Your cost of capital, or the return available on an equally risky alternative. For a company that is often the weighted average cost of capital; for an individual it might be an expected market return.
The rate should rise with risk. A speculative project discounted at a safe rate will look far better than it is, which is the most common way NPV gets misused.
That the project returns less than your required rate, so your money would do better in the alternative you used to set the discount rate.
It does not mean the project loses money in cash terms. The example returns $150,000 on a $100,000 outlay and still has a negative NPV at 20%, because that gain is not enough for the return demanded.
NPV, when they disagree. It gives an amount of value created and is directly comparable between projects of different sizes.
[IRR](/financial/irr-calculator) is a percentage, which communicates well, but a 50% return on $1,000 beats nothing worth having next to a 15% return on $1 million. IRR can also produce multiple answers when cash flows change sign more than once.
Because you could invest money you have now. Waiting a year for $1,000 costs you whatever that $1,000 would have earned in the meantime.
Risk adds to it: a promised future payment might not arrive. Both effects are bundled into the discount rate, which is why riskier projects get discounted harder.
Yes, as a negative amount at time zero. It is not discounted, because it happens now.
Some tools ask for it separately and subtract it for you. Entering it twice, once in the cash flow list and once in the investment field, is an easy way to get an answer that is exactly one investment too low.
Yes, and that is one of its advantages. Each period is discounted individually, so the amounts can differ freely and some can be negative.
A project with a large maintenance outlay in year 4 is handled naturally: that year simply contributes a negative discounted value.
Problems people actually run into
Picking a discount rate to get the answer you want
The same $30,000 for five years is worth +$13,724 at 10% and −$10,282 at 20%. Someone who wants a project approved can choose a low rate and make it work.
Set the rate from your actual cost of capital before you see the result, and use the same rate across competing projects of similar risk.
Trusting the forecast more than it deserves
NPV produces a precise figure from cash flow estimates that are often guesses, and the precision makes the guesses look solid.
Run the calculation across a range of scenarios. If the project only works on optimistic cash flows and a generous discount rate, that is the real finding.
Results are estimates for general information only and are not professional financial, medical, or legal advice. Read our full disclaimer.
Last updated: September 4, 2026