FINANCIAL · NPV CALCULATOR (NET PRESENT VALUE & IRR)
NPV Calculator (Net Present Value & IRR)
Calculate net present value (NPV), internal rate of return (IRR), and payback period for any investment with multiple future cash flows.
| Period | Cash Flow | Discount Factor | PV |
|---|---|---|---|
| 1 | $3,000.00 | 0.909091 | $2,727.27 |
| 2 | $4,000.00 | 0.826446 | $3,305.79 |
| 3 | $4,000.00 | 0.751315 | $3,005.26 |
| 4 | $3,000.00 | 0.683013 | $2,049.04 |
About This Calculator
Net Present Value (NPV) tells you whether a series of future cash flows is worth more than its upfront cost when discounted at your required rate of return. A positive NPV means the investment creates value; a negative NPV means it destroys value. This calculator also solves for the Internal Rate of Return (IRR) — the discount rate that makes NPV equal to zero — and the payback period.
How It Works
Enter the initial investment (period 0 outflow), your discount rate, and future cash flows for each period. Cash flows can be negative (re-investment outflows). NPV is computed as the sum of each discounted cash flow minus the initial investment. IRR is solved using Newton-Raphson iteration. Payback period is the first period when cumulative undiscounted cash flow turns non-negative.
The Formula
NPV = −I₀ + Σ [CFₜ / (1+r)^t]
- I₀
- initial investment (period-0 outflow, entered as a positive number)
- CFₜ
- cash flow in period t (positive = inflow, negative = outflow)
- r
- discount rate per period (required rate of return, as decimal)
- t
- period index (1, 2, 3, …, n)
- IRR
- discount rate where NPV = 0 — solved numerically
Frequently Asked Questions
- What does a positive NPV mean?
- A positive NPV means the investment is expected to generate more value (in today's dollars) than it costs. The project creates wealth equal to the NPV amount above the minimum required return. As a decision rule — accept projects with NPV > 0, reject those with NPV < 0.
- How is IRR related to NPV?
- IRR is the specific discount rate at which NPV equals zero — the breakeven return. If IRR exceeds your required rate of return (discount rate), the project is worthwhile. IRR and NPV generally agree on accept/reject decisions, but NPV is preferred for comparing mutually exclusive projects of different scales.
- Why might an IRR not exist?
- IRR requires at least one sign change in the cash-flow stream (i.e., at least one inflow after an outflow). If all cash flows are the same sign (all costs or all revenues), no IRR exists. Multiple sign changes can also produce multiple IRRs, in which case NPV is the more reliable criterion.
- What is the payback period and why is it useful?
- The payback period is the number of periods required to recover the initial investment from cash inflows. It is simple to understand and useful as a liquidity or risk measure — shorter payback means faster capital recovery. However, it ignores the time value of money and cash flows beyond the payback point, so it complements rather than replaces NPV analysis.