NPV Calculator

Calculate Net Present Value (NPV), Internal Rate of Return (IRR), MIRR, and Profitability Index for investment decisions. Supports equal and variable cash flows with sensitivity analysis.

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Net Present Value (NPV)
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Profitability Index —
Estimated Payoff Year —
Extended More scenarios, charts & detailed breakdown ▾
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NPV
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Total Undiscounted Cash Flows —
Profitability Index —
NPV Decision —
Professional Full parameters & maximum detail ▾
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NPV
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IRR (Internal Rate of Return) —
MIRR (Modified IRR) —
Profitability Index —
NPV at Discount Rate −2% —
NPV at Discount Rate +2% —
Break-even Discount Rate (≈IRR) —

How to Use This Calculator

  1. Enter your initial investment (the upfront cost).
  2. Enter the annual cash flow you expect to receive each year.
  3. Enter your discount rate (use your WACC or required rate of return).
  4. Enter the number of years the investment generates returns.
  5. See NPV, Profitability Index, and payoff year instantly.
  6. Use Variable Cash Flows tab for investments with different cash flows each year.
  7. Use the Professional tab for up to 7 years of variable cash flows, IRR, MIRR, and sensitivity analysis.

Formula

NPV = Σ [CF_t ÷ (1+r)^t] − Initial Investment

Profitability Index = PV of Cash Flows ÷ Initial Investment

IRR: discount rate where NPV = 0 (solved iteratively)

Example

$100,000 investment, $30,000/year for 5 years, 10% discount rate. PV = $30,000 × [(1−1.1^−5)÷0.10] = $113,724. NPV = $113,724 − $100,000 = $13,724. PI = 1.137. Project creates value — accept.

Frequently Asked Questions

  • NPV measures the difference between the present value of future cash inflows and the initial investment. A positive NPV means the investment creates value at the given discount rate. NPV = Σ [Cash Flow_t ÷ (1 + r)^t] − Initial Investment.
  • Use your company's WACC (Weighted Average Cost of Capital) — the blended cost of debt and equity financing. Typical WACC ranges: startups 15–25%, established companies 8–12%, low-risk projects 5–8%. Using a higher discount rate makes future cash flows worth less today, reducing NPV.
  • IRR (Internal Rate of Return) is the discount rate at which NPV = 0 — essentially the project's expected annual return. Accept if IRR > your discount rate. NPV is the absolute dollar value created. Use NPV for choosing between projects of different sizes; IRR can mislead when comparing projects with different capital requirements.
  • Profitability Index (PI) = Present Value of Cash Flows ÷ Initial Investment. PI > 1.0 means the investment is profitable. PI = 1.0 means NPV = 0. Useful for ranking projects when capital is constrained — higher PI = more value per dollar invested.
  • MIRR (Modified IRR) addresses a flaw in IRR — the assumption that interim cash flows are reinvested at the IRR rate (often unrealistic). MIRR uses a separate reinvestment rate (typically your WACC or a conservative rate). MIRR is more conservative and generally more realistic than IRR for capital budgeting.

Related Calculators

📈 ROI Calculator 💰 Present Value Calculator ⏱️ Payback Period Calculator
Sources & References (5) ▾
  1. SEC Investor.gov — Investment Valuation Tools — U.S. Securities and Exchange Commission
  2. CFA Institute — Capital Budgeting and NPV — CFA Institute
  3. Federal Reserve — Discount Rate Policy — Federal Reserve
  4. FINRA — Investment Valuation Methods — Financial Industry Regulatory Authority
  5. SBA — Capital Investment Financial Analysis — U.S. Small Business Administration