Calculate the Net Present Value of an investment from its initial cost and a series of future cash flows.
How It Works
How NPV Calculator Works
Each future year's cash flow is discounted back to today's value using your chosen discount rate — money received further in the future is worth less today, since it could otherwise have been earning that same rate of return in the meantime. Adding up all the discounted cash flows and subtracting the initial investment gives the NPV.
Worked Example
See It In Action
A $1,000 investment returning $500 a year for 3 years, discounted at 10%, has an NPV of about $243 — meaning the investment is expected to be worth about $243 more than simply not investing the money at all.
FAQ
Frequently Asked Questions
What discount rate should I use?
It should reflect your required rate of return or cost of capital — often the return you could reasonably expect from an alternative investment of similar risk. A higher discount rate makes future cash flows worth less today, lowering the NPV.
What does a negative NPV mean?
It means the investment's future cash flows, once discounted back to today's value, don't cover the initial cost at your chosen discount rate — the money would likely do better invested elsewhere at that same rate of return.
