NPV Calculator (Net Present Value)
Free net present value calculator. Enter a discount rate and cash flows to find NPV, present value, and profitability index, with the formula shown.
Updated 2026-06-14 · Free · No sign-up · Runs privately in your browser
Show the formula & steps
How the NPV Calculator Works
Net present value (NPV) tells you what a stream of future cash flows is worth in today’s dollars, after accounting for the time value of money. Enter your discount rate per period, the initial investment (usually negative), and the future cash flows. The calculator discounts each future amount back to the present and sums them, then shows the NPV, the present value of the inflows, and the profitability index.
The Formula
NPV = CF₀ + CF₁ / (1 + r)¹ + CF₂ / (1 + r)² + … + CFₙ / (1 + r)ⁿ
where r is the discount rate per period and CFₜ is the cash flow at period t. The initial outlay CF₀ occurs at period 0, so it is not discounted. Future cash flows are divided by (1 + r) raised to the power of how many periods away they are.
Worked Example
Invest $1,000 today at a 10% discount rate, and receive $300, $420, and $680 over the next three periods:
- PV of year 1: 300 / 1.10 = 272.73
- PV of year 2: 420 / 1.10² = 347.11
- PV of year 3: 680 / 1.10³ = 510.89
- Present value of inflows = 272.73 + 347.11 + 510.89 = 1,130.73
- NPV = −1,000 + 1,130.73 = +130.73
Because the NPV is positive, the project earns more than the 10% required return and is expected to add value.
| Discount rate | NPV of the example flows |
|---|---|
| 0% | +400.00 |
| 10% | +130.73 |
| 16.34% | ≈ 0.00 (this is the IRR) |
| 25% | −143.04 |
Reading the Result
A positive NPV means the investment’s return beats your discount rate, so it creates value. A negative NPV means it falls short. An NPV of exactly zero means the project earns precisely the discount rate — the rate at which NPV hits zero is the internal rate of return (IRR). The profitability index (present value of inflows ÷ initial investment) restates the same verdict as a ratio: above 1.0 is good.
Why NPV Beats Simple Payback
Unlike a simple sum of cash flows, NPV respects the fact that a dollar received next year is worth less than a dollar today. That makes it the most theoretically sound way to compare investments of different timing and size. Choose the project with the highest positive NPV at your required rate, and use IRR and payback period as supporting checks.
Frequently asked questions
What is net present value (NPV)?+
Net present value is the value today of a series of future cash flows minus the initial investment, after discounting each future amount by a chosen rate. A positive NPV means the investment is expected to earn more than the discount rate; a negative NPV means it earns less.
How do you calculate NPV?+
Discount each future cash flow back to today using NPV = CF0 + CF1/(1+r) + CF2/(1+r)^2 + ... + CFn/(1+r)^n, where r is the discount rate per period. Add the present values together; the initial outlay (CF0) is usually negative.
What discount rate should I use for NPV?+
Use your cost of capital or required rate of return, which reflects the return you could earn on a comparable-risk investment. Companies often use their weighted average cost of capital (WACC); individuals may use an expected market return or hurdle rate.
Is a higher or lower NPV better?+
A higher NPV is better. When choosing between projects, pick the one with the highest positive NPV, because it adds the most value in today's dollars. Reject any project with a negative NPV at your required rate.
What is the profitability index?+
The profitability index is the present value of future cash flows divided by the initial investment. A value above 1.0 means the project creates value (equivalent to a positive NPV); below 1.0 means it destroys value. It is useful for ranking projects when capital is limited.