NPV Calculator
Calculate Net Present Value (NPV) of an investment with an initial cost and up to 5 years of projected cash flows.
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How to use this calculator
Each future cash flow is discounted back to today's value using the discount rate. Sum all discounted cash flows and subtract the initial investment.
- 1
Enter the initial investment amount (a cost, so it is negative in theory).
- 2
Enter the discount rate — typically your cost of capital or WACC.
- 3
Enter projected annual cash flows for years 1–5.
- 4
A positive NPV means the investment creates value; negative means it destroys value.
Frequently asked questions
What formula does this tool use?
This tool uses NPV = CF₁/(1 + r) + CF₂/(1 + r)² + … + CF₅/(1 + r)⁵ − Initial Investment. The initial amount sits at time 0 and is not discounted. Each year’s cash flow is treated as arriving at the end of that year, one full year apart.
What sign should I use for the initial investment and the cash flows?
Enter the initial investment as a positive number; the tool subtracts it. Enter inflows as positive and outflows, such as a year-3 refit, as negative. Typing a negative initial investment would add to the NPV instead of reducing it, which is rarely what you want.
Is the discount rate a percentage?
Yes, enter 10 for 10%. It is one constant rate applied to every year. The tool does not suggest a rate: it is your required return, cost of capital or other hurdle, and the NPV changes a lot with it. On the default cash flows the NPV falls from $50,000.00 at 0% to $24,088.02 at 10% and $7,230.58 at 20%.
What does a 0% discount rate do?
With 0% nothing is discounted, so NPV is simply the sum of the five cash flows minus the initial investment. Zero is treated as a real value, not as a missing field. A rate of −100% or below makes the formula meaningless, so the tool shows n/a.
What does the sign line tell me?
It reports whether the NPV is positive, negative or zero at the rate you entered, meaning whether discounted inflows exceed, fall short of, or match the initial cost. It is a description of the arithmetic and not a recommendation, since it ignores risk, financing, alternatives and anything outside the five years.
Can I analyse more than five years or monthly flows?
No. There are five annual cash-flow fields. Enter 0 for years with no flow. Nothing is assumed after year 5, so a project that keeps earning afterwards needs its later value folded into the year-5 figure by you, and monthly flows need to be totalled by year first.
How is NPV different from the IRR result?
NPV is a currency amount at a rate you choose, while IRR is the rate at which that amount would be zero. The default flows with a 50,000 outlay give $963.20 at 25% and a negative figure only at higher rates, so the break-even rate is above 25%. Taxes, inflation and financing costs are not included in either.
Net present value for a five-year cash-flow plan
What NPV adds up
Net present value takes each year’s expected cash flow, divides it by (1 + r) raised to that year’s number, sums the results, and subtracts what you pay at the start. The output is a single amount in today’s money. A positive figure means the discounted inflows are larger than the cost at your chosen rate, and a negative one means they are smaller.
Worked example: 50,000 outlay, five inflows
The built-in case has a 50,000 outlay, a 10% rate, and inflows of 15,000, 18,000, 20,000, 22,000 and 25,000. They total $100,000 undiscounted, but their present value at 10% is $74,088.02, so NPV is $24,088.02. A second case with an 8,000 outlay, a 12% rate and inflows rising from 1,000 to 5,000 gives an NPV of $2,001.79 on a PV of $10,001.79.
How the discount rate moves the answer
Cash flows far in the future lose the most value as the rate rises, so back-loaded projects are the most sensitive. The table holds the default flows and outlay fixed and changes only the rate, then adds two cases with unusual timing: a single payoff in year 5 and a flow that dips negative in year 1.
| Case | Rate | NPV |
|---|---|---|
| Outlay 50,000; flows 15k–25k | 0% | $50,000.00 |
| Outlay 50,000; flows 15k–25k | 10% | $24,088.02 |
| Outlay 50,000; flows 15k–25k | 20% | $7,230.58 |
| Outlay 50,000; flows 15k–25k | 25% | $963.20 |
| Outlay 10,000; 15,000 only in year 5 | 8% | $208.75 |
| Outlay 20,000; −1,000, 9,000, 9,000, 9,000, 0 | 5% | $2,389.75 |
Reading timing and sign correctly
Because every flow is placed at a year end, the tool treats a payment on 1 January and one on 31 December of the same year identically. The outlay is assumed to happen right now. If your project spends money partly in year 1, enter that part as a negative number in the year 1 field rather than adding it to the initial amount, so that it is discounted by one year.
Choosing the discount rate and using the answer
The rate drives everything. A required return, a financing cost and a rate that compensates for uncertainty can all be reasonable choices and can produce very different NPVs, so it is worth running several. The result is an illustration of your inputs, not a forecast, and it does not replace judgement about risk, tax or alternatives. A useful routine is to run the same flows at three rates, such as 0%, a base rate and a higher one, and watch where the sign flips; the default flows stay positive through 25%, with NPV shrinking at every step.
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →