NPV Calculator (Net Present Value)

Discount up to six yearly cash flows at your required rate to get net present value (NPV) and the profitability index.

%
Your cost of capital or minimum acceptable return.
Your rate is remembered on this device.
$
Paid today (period 0), so it is not discounted.
$
Net cash in (positive) or out (negative) at the end of each year. Leave unused years at 0.
$
$
$
$
$
Net present value (NPV)
$2,835.62
Positive: the project earns more than the discount rate.
Present value of cash flows
$18,835.62
Undiscounted net cash flow
$10,000.00
Profitability index (PV ÷ investment)
1.177

Estimate generated with SortedSums: https://sortedsums.com/npv-calculator/. For informational purposes only; verify before relying on it.

Estimate only. This tool is for informational and educational purposes. Results depend on your inputs and simplifying assumptions, and are not a substitute for professional engineering, design or financial advice. Always verify with a qualified professional and applicable codes before purchasing, building or making decisions.

How it’s calculated

Net present value converts each future cash flow into today's money by discounting it at your required rate, then subtracts the upfront cost. A positive NPV means the project beats that rate.

PV = CF1 ÷ (1 + r)¹ + CF2 ÷ (1 + r)² + … + CF6 ÷ (1 + r)⁶ NPV = PV − Initial investment Profitability index = PV ÷ Initial investment

Example (OpenStax Principles of Finance 16.2): an embroidery machine costs $16,000 and returns $2,000, $4,000, then $5,000 a year for four years, discounted at 9%. The present values add up to $18,835.62, so NPV = 18,835.62 − 16,000 = $2,835.62 (the book shows $2,835.63 after rounding each year) and PI = 1.177. Because NPV is positive, the machine is worth buying.

Timing convention: the initial investment is paid at year 0 (today) and is not discounted; each yearly cash flow arrives at the end of its year, so year 1 is divided by (1 + r)¹. Spreadsheet NPV() functions discount every value they are given, including the first, so add the year-0 investment outside NPV() to match this calculator. Results are only as good as the forecasts you enter.

Frequently asked questions

What discount rate should I use?

Use the return you could earn elsewhere at similar risk, often the company’s cost of capital. Higher-risk projects warrant a higher rate.

What does a profitability index above 1 mean?

Each dollar invested returns more than a dollar of present value. PI above 1 is the same as a positive NPV; it is handy for ranking projects of different sizes.

Can I enter a negative cash flow in a later year?

Yes. Enter outflows such as a major overhaul as negative numbers in that year.

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Sources

Formulas are taken from the free public references above. Results are provided “as is” for informational and educational purposes only. See our disclaimer.

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