NPV Calculator
Uneven cash flows, with period zero left undiscounted.
Work out NPV. Uneven cash flows, with period zero left undiscounted. Rate, term and cash flows are all yours to set — nothing here is assumed.
Your cost of capital, or the return you could get elsewhere.
Negative for money going out. Not discounted.
NPV is only as good as the discount rate. Changing it by a point or two moves the answer more than most forecast revisions do, which is why it is worth running the rate across a range rather than trusting a single figure.
Net present value
$78.82
earns more than 10%
Positive, so the project returns more than the 10% you set. Note that year 0 is not discounted — if you are checking this against a spreadsheet, Excel's NPV function discounts its first argument, so the outlay has to sit outside it.
How the NPV Calculator works
Net present value is every future cash flow brought back to today and added up. The arithmetic is simple; the two things that go wrong are the convention and the rate. Period zero is not discounted — a spreadsheet's NPV function discounts its first argument, which is why NPV in Excel is written as the outlay plus NPV of everything after it — and the rate you choose moves the answer more than most of the forecast does.
Also known as: net present value calculator · NPV of future cash flows calculator · discounted cash flow calculator · cash flow calculator NPV · net present value discount rate calculator
The calculation itself
Every cash flow is divided by (1 + r) raised to its period number, and the results are added. The initial investment sits at period zero, where the exponent is zero and the divisor is one — so it is not discounted at all.
Net present value is that total. Above zero, the project earns more than the rate you set; below zero, less. It is not a forecast of profit, it is a comparison against an alternative use of the money.
The profitability index divides the present value of the inflows by the outlay. It says the same thing about whether to proceed but ranks projects by value per dollar, which matters when there is not enough capital for all of them.
In practice
A $1,000 investment returning $500, $400, $300 and $100 over four years, discounted at 10%.
The factors are 0.9091, 0.8264, 0.7513 and 0.6830, so those inflows are worth $454.55, $330.58, $225.39 and $68.30 — $1,078.82 in total against $1,000 spent.
NPV is $78.82 and the profitability index is 1.079. The project clears 10%, with about eight cents of surplus per dollar invested.
Notice how the last year contributes. The $100 in year four is worth $68.30, a third of it lost to the wait. At a longer horizon that erosion is what dominates: a payment twenty years out at 10% is worth about fifteen cents on the dollar.
The Excel trap
Excel's NPV function discounts its first argument by one period, treating it as arriving at the end of year one. It is not the NPV of finance textbooks, and the naming is the single most reliable source of wrong answers in corporate models.
The standard fix is to keep the outlay outside: =A1+NPV(rate, A2:A5), with A1 the negative investment at time zero. Google Sheets and LibreOffice behave the same way.
This calculator uses the textbook convention — period zero undiscounted — which is why the year-zero row shows a factor of exactly 1.0000. If your spreadsheet disagrees with this page by exactly one period of discounting, that is the reason.
Where the figure deceives
The discount rate does more work than the forecast. Moving it a couple of points typically changes NPV more than a serious revision to the cash flows would, and it is the input with the least evidence behind it.
So a single NPV carries less information than it appears to. Running the rate across a range and seeing where the sign flips is more honest than reporting one number to the cent.
A positive NPV also only means better than not doing it. Against a mutually exclusive alternative with a larger NPV, a positive project is still the wrong choice — and against a limited capital budget, the profitability index ranks better than NPV does.
And NPV says nothing about when. Two projects with identical NPV can differ completely in how long the money is at risk, which is what payback exists to show.
Acting on it
Set the rate from what capital actually costs you, not from a round number. WACC is the usual answer for a company; for a project riskier than the business, something above it.
Check the sign at several rates rather than one. If NPV flips between plausible rates, the decision is about the rate rather than the project.
Keep the outlay at period zero and verify against a spreadsheet knowing the convention differs. A model that is out by exactly one period of discounting has this bug.
Not financial advice. This calculator is for planning and illustration, not financial advice. Real products carry fees, taxes, and terms it does not model. Confirm figures with your lender or a qualified adviser before committing.
Frequently asked questions
How do I calculate NPV?
Divide each cash flow by (1 + r) raised to its period number and add them, with the initial investment at period zero and therefore undiscounted. A positive total means the project earns more than the discount rate you set.
Why does Excel's NPV give a different answer?
Because Excel discounts its first argument by one period, treating it as end of year one. The usual fix is to write =A1+NPV(rate, A2:An), keeping the outlay outside the function. It is the commonest NPV error in circulation.
What discount rate should I use?
For a company, its weighted average cost of capital; for a project riskier than the company, something above it. There is no correct rate independent of who is investing, which is why it is an input rather than a default.
What is the profitability index?
Present value of the inflows divided by the initial outlay. It says the same thing as NPV about whether to proceed, but ranks projects by value per dollar invested, which matters when capital is limited.
Is a positive NPV always worth doing?
It is worth doing rather than not doing, which is not the same as being the best use of the money. Against a mutually exclusive alternative with a higher NPV, a positive one is still the wrong choice.
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