Net Present Value Calculator

Discount a series of future cash flows to present value and test whether a project creates value.

About Net Present Value Calculator

The annuity factor sums the discount factors in closed form for a level cash flow. A positive NPV means the project earns more than the discount rate, which is the decision rule; the profitability index ranks projects when capital is constrained. NPV is the theoretically correct appraisal measure because it is denominated in value rather than a rate, and values add across projects.

Formula

Net Present Value

NPV = Σ cash flow ÷ (1 + r)ᵗ − initial investment

r: Discount rate reflecting the opportunity cost of capital
profitability index: Present value of inflows per unit invested

Worked example

With the default values below, Net Present Value Calculator returns Net Present Value of $12,351.24. Change any input above and every figure here is recalculated in your browser.

Inputs used

Initial investmentminimum 0: 100,000
Annual cash inflowminimum 0: 28,000
Discount rateaccepts 0–100 %: 10 %
Project lifeaccepts 1–50 years: 5 years
Terminal or salvage valueminimum 0: 10,000

Results

Net Present Value: $12,351.24
Present Value of the Inflows: $112,351.24
Profitability Index: 1.124
Discounted Payback Period: 4.64 years
Verdict: Accept — the project creates value at this discount rate

Step by step

1Values used
2Net Present Value
3Net Present Value= 12,351.24
4Present Value of the Inflows= 112,351.24
5Profitability Index= 1.124
6Discounted Payback Period= 4.64 years
7Verdict= Accept — the project creates value at this discount rate

Assumptions and limits

The result is derived only from the 5 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, tax or fees or charges into account.
Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Net Present Value calculated?

NPV = Σ cash flow ÷ (1 + r)ᵗ − initial investment The annuity factor sums the discount factors in closed form for a level cash flow. A positive NPV means the project earns more than the discount rate, which is the decision rule; the profitability index ranks projects when capital is constrained.

Why does Net Present Value matter?

NPV is the theoretically correct appraisal measure because it is denominated in value rather than a rate, and values add across projects.

What values do I need to enter?

This calculator takes 5 inputs: Initial investment, Annual cash inflow, Discount rate, Project life, Terminal or salvage value. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.