NPV Calculator

Net present value asks a single sharp question: after discounting every future cash flow back at the rate you require, does the investment create or destroy value? It is the most reliable single test in capital budgeting because it works in money rather than in ratios.

Initial costCash spent at the start.Annual cash flowNet cash received each year.Discount rate(%)Your required annual return.YearsLife of the investment.

Net present value

$1,978.13

Present value of cash flows: $11,978.13
Annuity factor: 3.9927

Values update as you type. This calculator covers the single scenario its formula assumes — see Common Mistakes for what it leaves out.

The formula this calculator uses

NPV = -C0 + sum of CF / (1 + r)^t

C0: Upfront cost at time zero
CF: Cash flow received each year
r: Discount rate, the required return
t: Year of each cash flow

How to check the result by hand

1
List the cash flows
Record the upfront cost as a negative at year zero and each year's net inflow as a positive.
2
Choose the discount rate
Use the return available on an investment of comparable risk. This is the hurdle the project must clear.
3
Discount each flow
Divide each future flow by one plus the rate raised to its year. For a level stream, use the annuity factor instead of discounting year by year.
4
Subtract the upfront cost
Sum the discounted flows and subtract the initial investment to get the NPV.
5
Decide
A positive NPV means accept, a negative means reject. The size of the NPV shows how much value the decision adds or destroys.

For worked examples, common mistakes and the limits of this formula, read the full How To Calculate NPV page.