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Net Present Value Calculator

Enter the discount rate, initial investment and the future cash flows to find the NPV.

How it is calculated

The tool takes the discount rate r as a percentage per period, the initial investment I as a positive number (an outflow at time 0) and a list of cash flows separated by commas or spaces. Cash flow number t is counted at the end of period t, so the first value is discounted one period, the second two periods, and so on:

NPV = −I + CF1/(1+r) + CF2/(1+r)2 + … + CFn/(1+r)n

Entries that are not numbers are silently skipped, and the periods after them move up by one. The result is shown to two decimals, with a minus sign for a negative NPV, and the number of cash flows actually used is shown next to it. The rate and the periods must use the same time unit, for example an annual rate with yearly flows. A discount rate of −100% or below gives no result, because the formula would divide by zero.

Worked example

Discount rate 10%, initial investment 1,000, cash flows 300, 400, 500, 200. Discounted values: 300 / 1.10 = 272.73; 400 / 1.21 = 330.58; 500 / 1.331 = 375.66; 200 / 1.4641 = 136.60. They add up to 1,115.57. Subtracting the 1,000 investment gives an NPV of $115.57 over 4 periods. Because it is positive, the project earns more than the 10% required return.

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Common mistakes

  • Including the initial investment as the first cash flow. It has its own field and is subtracted at time 0; adding it again as a negative flow would discount it by one period and double count it.
  • Entering the initial investment as a negative number. The field expects a positive outflow, so a minus sign flips the sign of the whole investment and inflates the NPV.
  • Mixing time units, such as a 12% annual rate with monthly cash flows. Convert the rate to a monthly rate first.
  • Leaving a typo such as a letter or a currency symbol inside the list. The entry is dropped without warning and every later flow is discounted one period too little, so check the period count in the result.
  • Skipping a year with no cash flow. Type 0 for it; leaving it out shifts all later flows earlier.

Sources

About this calculator

Net Present Value (NPV) discounts a series of future cash flows back to today's value and subtracts the initial investment, using the formula NPV = −Initial Investment + Σ [CFₜ / (1 + r)ᵗ] for each period t, where r is the discount rate. A positive NPV means the projected cash flows are worth more today than the cost of the investment; a negative NPV means the opposite, once the time value of money and the chosen discount rate are accounted for.

Corporate finance analysts and investors use NPV as the core test in capital budgeting — comparing competing projects, deciding whether to greenlight an expansion, or valuing whether a purchase price is justified by the cash flows it's expected to generate — precisely because it accounts for the fact that a dollar received years from now is worth less than a dollar in hand today.

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Comments (1)

  • Editorial team

    The discount rate drives NPV more than any other input, so it is worth running the same cash flows at a few rates. Take 1,000 invested with flows of 300, 400, 500 and 200: the NPV is 115.57 at 10 percent, 6.44 at 15 percent and -86.42 at 20 percent. Somewhere near 15 percent the verdict flips, which tells you how much room the project has. Which rate do you use for your projects?

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