NPV Calculator
Enter the initial investment, a discount rate and the cash flow expected in each year. The calculator discounts every cash flow to today's money and shows whether the project creates value.
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Created by the Reeliy Editorial Team. Last updated: Oct 19, 2026
How to use the NPV calculator
- Initial investment: what you pay at the start, as a positive number of at least 1. Cents are allowed here.
- Discount rate: your required yearly return in percent. It must be greater than zero.
- How many years?: a whole number from 1 to 25. One box appears for each year.
- Year 1, Year 2, ...: the net cash flow at the end of each year. Use a negative number for a year in which you pay out more than you receive. A blank box counts as zero. Cash flows are read as whole dollars, so cents are dropped.
The results are the net present value, the internal rate of return (see the IRR calculator), the gross return (total cash received minus the investment, divided by the investment) and the net cash flow (the same difference in dollars). A table beneath the results lists every year's cash flow next to its discounted value.
What net present value means
Net present value (NPV) measures how much value a project adds, expressed in today's money. Money received later is worth less than money received now, because the money could have been invested in the meantime and because the future is uncertain. NPV therefore shrinks each future cash flow by the discount rate, adds them up and subtracts what you paid at the start.
A positive NPV means the project earns more than your required return, so it adds value. A negative NPV means it earns less, and a result of zero means it just meets the requirement. This is the basic rule of capital budgeting: accept projects with a positive NPV.
The NPV formula
With initial investment C₀, discount rate d (as a decimal) and a cash flow CFₜ at the end of each year t from 1 to n:
NPV = −C₀ + CF₁ ÷ (1 + d)1 + CF₂ ÷ (1 + d)2 + … + CFₙ ÷ (1 + d)n
Each term CFₜ ÷ (1 + d)t is the present value of one year's cash flow. The factor 1 ÷ (1 + d)t is called the discount factor, and it falls as t grows or as the rate rises.
A worked example
You invest $1,000 and expect $200, $300, $400, $300 and $200 over five years. Your required return is 10%.
| Year | Cash flow | Discount factor at 10% | Present value |
|---|---|---|---|
| 0 | −$1,000 | 1.0000 | −$1,000.00 |
| 1 | $200 | 0.9091 | $181.82 |
| 2 | $300 | 0.8264 | $247.93 |
| 3 | $400 | 0.7513 | $300.53 |
| 4 | $300 | 0.6830 | $204.90 |
| 5 | $200 | 0.6209 | $124.18 |
The five present values add up to about $1,059.37 (the displayed lines are rounded, so adding them by hand may be a cent off). Subtracting the $1,000 investment gives an NPV of $59.37. It is positive, so the project clears a 10% hurdle. The gross return is 40% and the net cash flow is $400, but those two ignore timing. The IRR of 12.261% tells you the same story from another angle: the project earns more than the 10% you required.
| Discount rate | NPV |
|---|---|
| 5% | $211.64 |
| 8% | $116.55 |
| 10% | $59.37 |
| 12% | $6.58 |
| 15% | −$65.28 |
NPV falls as the discount rate rises and crosses zero at the IRR. This one switches sign just above 12%.
Choosing the discount rate
The discount rate is the most influential input. It should reflect what you could earn on another investment with a similar level of risk, which is why it is also called the opportunity cost of capital. Companies often use their weighted average cost of capital for typical projects (see the WACC calculator) and add a premium for riskier ones. Individuals may use the return they expect from a diversified portfolio.
Keep inflation consistent. If your cash flows are forecast in future (nominal) dollars, use a nominal discount rate. If they are in today's (real) dollars, use a real rate. Mixing the two tilts the result.
Using NPV well, and its limits
When projects compete for the same money, compare NPVs rather than rates alone. Consider a $10,000 project returning $6,000 a year for three years and a $100,000 project returning $45,000 a year for three years. At a 10% discount rate the first has an NPV of $4,921.11 and an IRR of 36.31%; the second has an NPV of $11,908.34 and an IRR of 16.65%. The smaller project has the higher percentage return, but the larger one adds more value in dollars.
- NPV depends entirely on the forecast. Test optimistic and pessimistic cash flows, not a single case.
- Cash flows are treated as arriving at the end of each year, and the project length is whole years.
- NPV does not value flexibility, such as the option to expand, delay or abandon a project.
- A discount rate of exactly zero is not accepted here, because discounting would then do nothing.
This calculator gives estimates for learning and planning, not investment, tax or legal advice. See our disclaimer. For a two-stage growth model, see the DCF calculator; for the time-value ideas behind both, the time value of money calculator.
Frequently asked questions
What does a negative NPV mean?
It means the project's cash flows, discounted at your required rate, are worth less than what you pay up front. The project earns less than your required return, so on these assumptions it destroys value.
How do I choose between two projects with positive NPVs?
If you can only do one, prefer the higher NPV, since it adds more dollars of value. If you can do both, accept both. Check the sensitivity of each to the discount rate before deciding.
Why does the calculator reject a discount rate of zero?
A zero rate means no discounting, so the NPV is just the total of the cash flows minus the investment. The calculator asks for a positive rate to keep the analysis meaningful. For a zero-rate check, use the net cash flow result instead.
Is a higher NPV always better?
Generally yes for projects of the same risk, but a large NPV from a very uncertain forecast can be worth less than a smaller, more reliable one. Look at how much of the value depends on distant years.
References
- Brealey, Myers and Allen, Principles of Corporate Finance, McGraw-Hill
- Ross, Westerfield and Jaffe, Corporate Finance, McGraw-Hill
Cite this calculator and page
If you use this page in your work, you can cite it as:
Reeliy Editorial Team. (2026). NPV Calculator. Reeliy. https://reeliy.com/calculators/npv-calculator“NPV Calculator.” Reeliy, 2026, https://reeliy.com/calculators/npv-calculator.