NPV Calculator
A positive NPV means the project earns more than 10.0% a year on the money invested.
How the NPV calculation works
Discount each year's cash flow back to today
Divide the cash flow by (1 + rate) raised to the year number. $15,000 in year 2 at 10% is worth $15,000 ÷ 1.21 = $12,396.69 today.
Add up the present values
The sum is what all the future cash is worth in today's dollars at your chosen rate.
Subtract the initial investment
NPV = present value of cash flows − initial investment. Above zero, the project beats your required return.
Pick a rate that reflects your alternatives
Use your borrowing cost or the return you could get elsewhere. A higher rate makes later cash flows worth less.
Worked example. A $50,000 investment that returns $15,000 a year for five years, discounted at 10%, has cash flows worth $56,861.80 today, so the NPV is $6,861.80.
NPV FAQ
What is the NPV formula?
NPV = Σ cash flow in year t ÷ (1 + r)^t − initial investment. Each future amount is shrunk by the discount rate for every year you wait for it.
How do you calculate NPV step by step?
Divide each year's cash flow by (1 + rate) to the power of the year, add the results, then subtract the up-front cost. For $15,000 a year for five years at 10%: $13,636.36 + $12,396.69 + $11,269.72 + $10,245.20 + $9,313.82 adds up to $56,861.80 (unrounded), and minus $50,000 gives an NPV of $6,861.80.
What discount rate should I use for NPV?
Use the return you need to make the project worth doing: your cost of capital (WACC), your borrowing rate, or what the money could earn elsewhere. Riskier projects deserve a higher rate. The higher the rate, the lower the NPV.
How do I calculate NPV on a financial calculator?
Enter the initial investment as a negative CF0, then each year's cash flow as CF1, CF2 and so on. Enter the discount rate as I (or I/Y) and press NPV. The result should match this calculator.
What does a negative NPV mean?
The project returns less than your discount rate. It may still make money in plain dollars, but less than you could earn with the same money elsewhere.
How is NPV different from IRR?
NPV gives a dollar amount at a rate you choose. IRR finds the rate at which NPV is exactly zero. A project with positive NPV at 10% has an IRR above 10%.
How do I calculate NPV in Excel?
Excel's NPV function treats every value as arriving at the end of a period, so the first value is discounted as year 1. Put only the yearly cash flows inside NPV and handle the up-front cost outside it: =NPV(rate, year1:year6) − initial investment. That matches this page.
Why does my Excel NPV not match?
The usual mistake is putting the year-0 investment inside NPV(). Excel then discounts it by one year as well. In the default example, =NPV(10%, −50000, 15000, 15000, 15000, 15000, 15000) gives $6,238.00 instead of the correct $6,861.80. Move the investment outside the function.