Calculators
NPV Calculator
Calculate net present value, profitability index and discounted payback for an investment with yearly cash flows.
- Runs in your browser
- Nothing uploaded
The tool
Enter your numbers below. Results update as you type, and nothing leaves your browser.
Everything you enter stays on your own machine. Nothing is sent to us or to anyone else, which you can confirm in your browser network tab.
What people use it for
- Capital budgeting decisions
- Comparing equipment purchases
- Evaluating business cases
- Finance coursework
About this tool
What the NPV Calculator does
Net present value (NPV) discounts each future cash flow back to today at your required rate of return and subtracts the initial investment. A positive NPV means the project earns more than that rate. The profitability index and discounted payback add two more ways to compare projects.
Formula
- Present value of year t = cash flow ÷ (1 + r)^t
- NPV = Σ present values − initial investment
- Profitability index = Σ present values ÷ initial investment
Worked example
Using the starting values in the calculator above:
| Input | Value |
|---|---|
| Discount rate | 10% |
| Initial investment | $100,000 |
| Cash flows by year | 5 entries |
| Result | Value |
|---|---|
| Net present value | $22,264 |
| Profitability index | 1.22 |
| Present value of cash flows | $122,264 |
| Discounted payback | 3.7 years |
How to read the result
Use a discount rate that reflects the risk of the project. Riskier projects deserve higher rates, which lowers their NPV.
When projects compete for limited capital, rank them by profitability index rather than NPV alone.
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Questions
Questions about this tool
The things clients actually want to know — costs, timelines, ownership and what happens after launch.
The investment is expected to return more than the discount rate, so it creates value.
Your cost of capital or the return you could earn on an alternative investment of similar risk.
The time it takes for discounted cash flows to repay the initial investment.
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