Net present value of cash flows. The NPV Calculator takes discount rate (cost of capital), initial investment, cash flow year 1, year 2, year 3, year 4, year 5 and returns net present value plus profitability index, present value of the cash flows, decision. Results update as you type, and the formula is shown under the result so you can repeat it in your own spreadsheet.
Investment maths is about comparing money at different points in time on a fair basis. Compound rates, discounting and annualised returns let you compare options of different sizes and durations. Use the worked example below to check the maths against your own figures.
How the NPV Calculator works
Net present value discounts each future cash flow back to today and subtracts the investment. A positive NPV means the project earns more than the discount rate; the profitability index shows value created per unit invested.
Worked example
With the example values (discount rate (cost of capital) of 10%, initial investment of $100,000, cash flow year 1 of $30,000, year 2 of $30,000, year 3 of $30,000, year 4 of $30,000, year 5 of $30,000), the net present value is $13,723.60; profitability index 1.14x, present value of the cash flows $113,723.60, decision Positive NPV: creates value at this discount rate. Change any figure above and the result updates immediately; use Copy results to paste the summary into a note or email.
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Frequently Asked Questions
How is net present value calculated?
NPV = −investment + ∑ cash flowt ÷ (1 + rate)t.
Which figures do I need?
Discount rate (cost of capital), initial investment, cash flow year 1, year 2, year 3, year 4, year 5. Take them from the same period and the same set of accounts or reports so the ratio is consistent, and check the example values as a guide to the units expected.
Does the calculator account for taxes and fees?
Only where there is an input for them. For a true net return, add fees and taxes to your inputs or use the stock and crypto profit calculators, which include them.
