NPV Calculator
Calculate Net Present Value (NPV) of an investment from cash flows + discount rate. Accept/Reject verdict + year-by-year breakdown.
NPV Calculator
Future cash flows
How to use the NPV Calculator
Enter the initial investment
This is the upfront cost — what you pay in Year 0 to start the project. Entered as a positive number (the tool treats it as an outflow internally).
Pick a discount rate
The discount rate is your required return — the opportunity cost of capital. Use your WACC (Weighted Average Cost of Capital) if you have it. For personal investments, a long-run diversified-equity return or the interest rate on debt you could repay instead are the usual reference points. Higher rates are more demanding; the same cash flows produce a lower NPV.
List the expected cash flows
Year 1 to N — the cash flowing IN from the project each year. Five years are pre-loaded; use + Add another year to extend (no limit) or × to remove. Negative inflows? Enter them as negative numbers — the tool handles mid-life capex or losses.
Read the verdict
NPV > 0 → Accept the project (it creates value at your required return). NPV < 0 → Reject. The year-by-year breakdown shows each cash flow's present value — the more distant the year, the less the future dollar is worth today.
NPV — the corporate finance foundation
Net Present Value is the bedrock of corporate finance. It answers a deceptively simple question: given the time value of money, is this investment worth making? The math captures one elegant insight — a dollar received in five years is worth less than a dollar in your hand today, because the dollar you have now can be invested. NPV translates every future cash flow into "today's dollars" using a discount rate, then sums them all up against the initial cost. Positive total → the project creates value. Negative total → it destroys value. There is no more important decision rule in finance.
Where the discount rate comes from
The choice of discount rate is the single biggest lever in any NPV calculation. For a corporate investment, the standard reference is the company's Weighted Average Cost of Capital (WACC) — the blended cost of debt and equity, weighted by their proportions in the capital structure. For a large listed company WACC is usually a high-single-digit percentage; for a small business or startup it is markedly higher, reflecting equity holders' demand for higher returns on riskier ventures — Aswath Damodaran's annual industry cost-of-capital tables (NYU Stern) are the standard public reference. For personal investments, common benchmarks are a long-run diversified-equity return or your mortgage rate (the guaranteed return on prepaying debt instead).
Move the discount rate from 8% to 10% and the present value of a level ten-year cash-flow stream falls by about 8% — but because NPV nets that against a fixed initial outlay, the swing in NPV itself can be several times larger. The discount rate is doing more work than most spreadsheet builders realise.
The APAC corporate finance use case
NPV is the foundational evaluation tool in every Singapore, Malaysia, and Indonesia CFO's toolkit when ranking capital projects against limited budgets. Vietnam's growth-stage corporates use it to evaluate infrastructure expansion; the Philippines' BPO industry uses it for facility decisions; Thailand's manufacturing sector uses it for equipment upgrades; Hong Kong's financial services use it across loan portfolios and investment products. Across the region, discount rates tend to be higher than in the US or EU because country risk premiums are higher — Damodaran's country-risk-premium tables put Indonesia and Vietnam well above Singapore. The tool is generic — you choose the rate — so it works regardless of jurisdiction.
NPV vs IRR — when each one wins
NPV and IRR (Internal Rate of Return) are complementary tools that usually agree on accept/reject but can disagree on ranking when comparing mutually exclusive projects of different scales or different cash-flow timing. Use NPV when: choosing between projects of different sizes (NPV measures dollar value created); when cash flows change sign multiple times (IRR can produce multiple solutions); when you have an external benchmark rate. Use IRR when: communicating to non-finance stakeholders (a percentage is more intuitive); ranking projects of similar scale; when the absolute scale of value created is less important than the rate of return. The honest professional answer is: compute both, and prefer NPV when they disagree on ranking.
Fisher's 1907 rule, the discount rate, and the two kinds of dollar you must not mix
The NPV decision rule was set out by Irving Fisher in "The Rate of Interest" (1907) — the underlying compound-interest arithmetic is centuries older.
Sensitivity: for a level 10-year stream, 8% → 10% cuts present value by about 8% — yet NPV, which nets off a fixed outlay, can swing several times that. Always run a sensitivity table.
NPV rule: positive = accept, negative = reject. It's the only universally-correct decision rule in corporate finance — every other rule (payback, accounting return) has edge cases where it gives wrong answers.
Cost of capital differs by industry — regulated utilities sit at the bottom of Damodaran's annual tables, early-stage biotech at the top. Higher risk → higher required return → harder to clear the NPV bar.
Terminal value in real-world DCF: after the explicit forecast period (usually 5-10 years), analysts add a "terminal value" computed via Gordon growth or an exit multiple — often the majority of a long-life asset's value.
Public sector NPV uses lower "social discount rates": HM Treasury's Green Book prescribes 3.5% real for the first 30 years; the US OMB's Circular A-94 (revised November 2023) prescribes 2.0% real, replacing the old 3% and 7%.
Inflation: NPV in real dollars uses real discount rate; NPV in nominal dollars uses nominal rate. Mixing them is the single most common DCF mistake in finance interviews.
Risk-free rate as floor: NPV at the risk-free rate (US Treasury yield) is the minimum bar for ANY positive-NPV claim. Below that, you're better off in T-bills.
Real options valuation extends NPV: the right but not obligation to expand, delay, or abandon adds option value that static NPV misses. Mining and biotech use it routinely.
NPV is in every CFA, MBA, ACCA, and CPA curriculum globally. Master it once — the math hasn't changed since Irving Fisher.
Frequently Asked Questions
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For corporate projects: your company's WACC. For personal investments: a long-run diversified-equity return or your mortgage rate (the debt-paydown alternative). For a risk-free comparison: the 10-year Treasury / SGS yield. Sensitivity-test 2pp above and below your base case.
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Enter it as positive — the tool treats it as a Year 0 outflow internally. The breakdown table shows it as a negative present value to make the math transparent. If you have additional capex in years 1-N, enter those as negative cash flows in the relevant year.
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NPV measures dollar value created accounting for time value of money. ROI (Return on Investment) is total return ÷ investment, ignoring timing. Payback period is "how many years until I get my money back" — ignores cash flows after payback and ignores time value. NPV is the only metric that handles both timing AND total value correctly.
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Yes — when the initial investment is large enough and the discount rate is high enough, even all-positive future cash flows can produce a negative NPV. That's the tool telling you: at your required return, this project doesn't pay back. Try lowering the discount rate or increasing the cash flows to see what would make it positive.
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Two approaches. Real method: enter cash flows in today's dollars, use real discount rate (nominal − inflation). Nominal method: enter inflated cash flows, use nominal discount rate. Both give the same answer if done consistently. Mixing them (real cash flows with nominal rate, or vice versa) is the single most common DCF mistake.
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Use Add Year to extend out to the project horizon. For very long-lived assets (infrastructure, real estate, perpetuities), practitioners often forecast 5-10 years explicitly then add a "terminal value" — usually computed via Gordon growth model: TV = CF_final × (1 + g) ÷ (r − g). Add the terminal value to the final year's cash flow.
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Use after-tax cash flows for project NPV. The tax shield from interest (if debt-financed) is reflected in the WACC's after-tax cost of debt, so the cash flows you discount should be operating cash flows after tax (often "free cash flow to firm"). Mixing pre-tax cash flows with after-tax WACC double-counts the tax effect.
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Prefer NPV when: (1) comparing mutually exclusive projects of different scales — NPV measures absolute value created; (2) cash flows change sign multiple times — IRR can produce multiple solutions; (3) the discount rate changes over time. IRR is more intuitive for communication (percentages travel better than dollar values) but NPV is the more reliable decision rule when they disagree.
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Yes. Initial investment is Year 0. Additional outflows in later years can be entered as negative cash flows in those years. So if you have $50K upfront then a $20K expansion investment in Year 3, enter $50K initial + Year 3 cash flow as (operating_cf − 20000).
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No. All calculation happens entirely in your browser via JavaScript. Open DevTools → Network and watch — there's zero outbound traffic. This makes the tool safe for confidential investment evaluations and competitive financial modelling.
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Method & sources
How it computes
NPV = −I₀ + Σₜ₌₁..ₙ CFₜ/(1+r)ᵗ with end-of-year cash flows and a single constant discount rate; verdict Accept if NPV > 0.01, Reject if < −0.01, otherwise Indifferent. Discount factors 1/(1+r)ᵗ are shown to six decimals.
What this tool implements
- Discrete annual compounding, cash flows at year-end, initial outlay at t=0 entered as a positive number and negated internally
- Fisher's NPV decision rule: accept when NPV > 0 at the required return
- No terminal value, no mid-year convention, no varying discount rates — users add a terminal value into the final year manually
- Public-sector rates cited: HM Treasury Green Book 3.5% real (years 1–30); OMB Circular A-94 2.0% real (Nov 2023)
Sources
- Fisher I. The Rate of Interest: Its Nature, Determination and Relation to Economic Phenomena. New York: Macmillan; 1907.
- Brealey RA, Myers SC, Allen F, Edmans A. Principles of Corporate Finance. 14th ed. New York: McGraw Hill; 2022. Chapters 2 and 5.
- gov.uk — the green book appraisal and evaluation in central government
- whitehouse.gov — CircularA 94.pdf
What can make this go out of date
- none at runtime
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