Calculate the Net Present Value (NPV) of an investment from its initial cost, a discount rate, and a series of future cash flows. A positive NPV means the project is expected to add value.
Net Present Value
Net Present Value is the difference between the present value of an investment's future cash inflows and its upfront cost. Because money received later is worth less than money today, each future cash flow is discounted back to the present at a chosen rate: NPV = −Initial + Σ CFₜ ÷ (1 + r)ᵗ. If the NPV is positive, the project is expected to earn more than your required return and adds value; if negative, it destroys value and should be rejected.
NPV is the gold standard of capital budgeting because, unlike payback period, it accounts for the time value of money and the full life of the project. The discount rate represents your cost of capital or required return — a higher rate is more demanding and lowers NPV. This calculator also shows the profitability index (PV of inflows ÷ initial investment); a value above 1.0 signals a worthwhile project.
NPV > 0 means the project earns more than your discount rate requires — it adds value. NPV < 0 means reject.
Use your cost of capital or required return. A higher rate discounts future cash flows more and lowers NPV.
PV of inflows ÷ initial cost. Above 1.0 is good; it's handy for ranking projects when capital is limited.