Net Present Value (NPV) Calculator
Discount a project’s cash flows at your required rate and get its net present value — the standard accept-or-reject test.
How it works
NPV = Σ CFₜ ÷ (1 + r)^t for t = 0 … n
Net present value discounts every cash flow a project produces — including the initial outlay at year 0 — back to today at your required rate, then sums them. A positive NPV means the discounted inflows exceed what you put in, so the project earns more than the discount rate and creates value; a negative NPV means it does not. NPV is the yardstick corporate finance treats as the theoretically correct capital-budgeting rule.
Worked example
A project costs $1,000 today and returns $300, $420, $680 and $800 over the next four years. Discounted at 10%, the inflows are worth about $272.73, $347.11, $510.90 and $546.41 — totalling $1,677.15 — so NPV ≈ $677.15. Because it is positive, the project is worth undertaking.
Frequently asked questions
What does a positive NPV mean?
It means the present value of the cash the project generates exceeds the cost of undertaking it, so the investment earns more than your discount rate and increases wealth. A negative NPV means the opposite.
How do I enter the cash flows?
List them in order starting with year 0. The initial investment is usually a negative number (money out), followed by the positive amounts you expect to receive each subsequent year.
How does NPV relate to IRR?
IRR is the discount rate that makes NPV exactly zero. If your required rate is below the IRR, NPV is positive and the project passes; above the IRR, NPV turns negative.
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Educational estimate, not investment advice.