NPV Calculator — Net Present Value
Compute the net present value of any project or investment. Enter your discount rate and cash flows to see the full discounted cash flow (DCF) table, IRR, and profitability index.
Cash Flows
Discounted Cash Flow Breakdown
| Year | Cash Flow | Discount Factor | Present Value | Cumulative PV |
|---|---|---|---|---|
| 0 | -$100,000 | 1.0000 | -$100,000 | -$100,000 |
| 1 | $30,000 | 0.9091 | $27,273 | -$72,727 |
| 2 | $35,000 | 0.8264 | $28,926 | -$43,802 |
| 3 | $35,000 | 0.7513 | $26,296 | -$17,506 |
| 4 | $30,000 | 0.6830 | $20,490 | $2,985 |
| 5 | $20,000 | 0.6209 | $12,418 | $15,403 |
NPV Formula Explained
NPV = Σ CFₜ / (1 + r)ᵗ − Initial Investment
Each future cash flow is divided by a discount factor — (1 + r)^t — which reduces its value by how long you have to wait and how uncertain the return is. The sum of all present values, minus the upfront cost, is the NPV.
Worked Example
Project: −$100K investment, $30K/yr for 5 years, discount rate 10%:
- Year 1: $30,000 / 1.10 = $27,273
- Year 2: $35,000 / 1.21 = $28,926
- Year 3: $35,000 / 1.331 = $26,296
- Year 4: $30,000 / 1.464 = $20,490
- Year 5: $20,000 / 1.611 = $12,421
- Sum of PVs = $115,406
- NPV = $115,406 − $100,000 = +$15,406 → Accept project
Discount Rate Guidelines
| Context | Typical Rate | Rationale |
|---|---|---|
| Government projects | 3–5% | Risk-free rate + small premium |
| Real estate | 6–10% | Leveraged returns with market risk |
| Corporate (WACC) | 8–12% | Weighted cost of equity + debt |
| Private equity | 15–25% | Illiquidity + active management premium |
| Startup / VC | 30–50%+ | High failure rate, long horizon |
| Personal finance | Your loan rate | Opportunity cost = debt cost |
| Inflation-adjusted | Real rate | Use real cash flows with real rate |
| Risk-adjusted | Add 2–5% per risk tier | Higher uncertainty = higher rate |
How to Calculate NPV — Step by Step
NPV (Net Present Value) tells you the value of future cash flows in today's dollars. Positive NPV = the investment creates value. Negative NPV = destroys value.
- 1Choose your discount rate. This is your required rate of return or cost of capital. For business projects: use WACC (weighted average cost of capital). For personal decisions: use your investment opportunity rate (e.g., 7–10% for stock market alternative).
- 2Discount each future cash flow. PV = Cₜ ÷ (1+r)ᵗ. Example at 10%: $50,000 in Year 1 = $50,000 ÷ 1.10 = $45,455. Year 2 $50,000 = $50,000 ÷ 1.21 = $41,322.
- 3Sum all discounted cash flows. Add PVs for all years. Subtract the initial investment. Result is NPV. If NPV > $0, the project exceeds your required return.
- 4Sensitivity: test different discount rates. NPV decreases as discount rate increases. Find the breakeven rate (= IRR). Projects with IRR far above the hurdle rate are robust even under pessimistic assumptions.
NPV Worked Example — $150,000 Investment, 10% Discount Rate
| Year | Cash Flow | Discount Factor (10%) | Present Value |
|---|---|---|---|
| 0 (initial) | −$150,000 | 1.000 | −$150,000 |
| 1 | +$40,000 | 0.909 | +$36,360 |
| 2 | +$50,000 | 0.826 | +$41,300 |
| 3 | +$55,000 | 0.751 | +$41,305 |
| 4 | +$60,000 | 0.683 | +$40,980 |
| 5 | +$65,000 | 0.621 | +$40,365 |
| NPV | +$50,310 | ||
NPV of +$50,310 means this investment creates $50,310 of value above the 10% required return. IRR ≈ 22% for this cash flow stream.
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This calculator is for educational purposes only and does not constitute financial advice.