Time Value of Money Calculator

What a project's cash flows are worth today, after discounting each one for how long you wait. A positive figure means the project earns more than the discount rate demands and is worth doing; a negative one means the money would work harder elsewhere. The first cash flow sits at time zero and is not discounted, which is where the initial outlay goes: discounting it as though it happened a year later makes every project look better than it is.

The discount rate at which net present value comes out at exactly zero, so a project is worth doing when its IRR beats what you could earn elsewhere. There is no formula for it. It has to be found by search, which is why it is quoted to a few decimal places rather than exactly.

Almost always because the cash flows never change sign. An all-positive series is not an investment, and there is no rate at which it breaks even, so a calculator that prints a number for it is printing something meaningless. Where the flows change sign more than once, several rates can satisfy the equation, and that case is flagged rather than hidden behind a single figure.

A stream where the payment falls at the start of each period rather than the end. Rent and leases usually work that way; loan repayments usually do not. It is worth exactly one period's interest more than the ordinary kind, because every payment sits earning for one period longer.

Because of compounding within the year. A nominal 24 percent compounded monthly really costs 26.82 percent, since each month's interest joins the balance and earns interest itself. Comparing two quotes on the nominal figure compares the wrong thing, which is why lenders in most countries are required to publish an effective figure alongside it.

No, it is interpolated within the year it crosses. A project that recovers its cost 40 percent of the way through year three pays back in 2.4 periods, and rounding that to three throws away most of what was asked.