Net Present Value (NPV) Calculator
Calculate NPV of investment cash flows. Determine if a project creates value at a given discount rate.
About this calculator
Net present value, or NPV, tells you whether an investment creates value once you account for the time value of money. A rupee received three years from now is worth less than a rupee today, so the tool discounts each future cash flow back to the present at the rate you choose, adds them up and subtracts what you pay today.
A positive NPV means the project earns more than your required return and creates value. A negative NPV means it falls short. The tool also reports an IRR, the discount rate at which NPV would be exactly zero. It is used in business capital budgeting, property decisions and personal choices such as buying equipment.
How to use it
- Enter the Initial Investment you pay today.
- Enter the Discount Rate, the return you require or your cost of capital.
- Enter the Cash Flows, one per year, separated by new lines or commas.
- Press Calculate NPV.
- Read the NPV, each year's present value and the IRR.
NPV formula
NPV = −Initial investment + Σ [Cash flowt ÷ (1 + r)t]
Cash flows are assumed at the end of each year. The IRR is the rate r that makes the NPV zero, found by repeated bisection.
Worked example
₹1,00,000 invested, cash flows of 30,000, 40,000, 50,000 and 20,000, discount rate 10%
| Year 1 present value | ₹27,272.73 |
| Year 2 present value | ₹33,057.85 |
| Year 3 present value | ₹37,565.74 |
| Year 4 present value | ₹13,660.27 |
| Sum of present values | ₹1,11,556.59 |
| NPV | ₹11,556.59 |
The NPV is positive and the IRR is 15.32%, above the 10% hurdle, so the project clears the bar.
Tips and common mistakes
- The discount rate drives the answer. Use your realistic opportunity cost, not a wishful number.
- A single NPV does not rank projects of different sizes. Compare NPV per rupee invested as well.
- Include every cash flow, such as maintenance, taxes and the final sale value.
- Test the result at a higher and lower rate to see how sensitive it is.
- If cash flows change sign more than once, IRR may be unreliable. Rely on NPV.
Frequently asked questions
What does a positive NPV mean?
The investment is expected to earn more than your required rate of return, so it adds value.
What discount rate should I use?
Use your cost of capital or the return you could earn on an alternative with similar risk. For personal decisions, the rate on a safe alternative plus a risk premium.
What is the difference between NPV and IRR?
NPV is a rupee amount at a chosen rate. IRR is the rate at which NPV is zero. Both should agree on accept or reject for simple projects.
Can I enter uneven cash flows?
Yes. Enter one value per year. Use zero for a year with no cash flow.
Are negative cash flows allowed?
Yes. Enter them with a minus sign, for example −5000 for a later outlay.
Why does time value of money matter?
Money today can be invested and earn a return. Future money is worth less because that opportunity is delayed.