NPV Calculator
Enter your initial investment, required discount rate, and annual cash flows for up to 10 years to calculate Net Present Value. Optional terminal value. Shows a year-by-year discounted cash flow table and a positive/negative investment decision indicator.
Enter your initial investment, discount rate, and expected cash flows for up to 10 years. Optionally add a terminal value. The calculator shows NPV, present value of cash flows, and an investment decision indicator.
Total capital invested at start (entered as positive)
Your required rate of return or cost of capital (WACC)
Enter the net cash flow received each year. Leave blank to stop at an earlier year. Negative values are allowed.
Added to the last cash flow year (e.g. property sale, exit valuation)
Formula
NPV = −Investment + Σ [CF_t ÷ (1 + r)^t] for t = 1 to n
NPV discounts each future cash flow back to today's value using the required discount rate (r). The initial investment is subtracted. A positive NPV means the investment returns more than the discount rate requires — it creates value. A negative NPV means the opposite.
Worked Example
£100,000 investment · 10% discount rate · £20k, £25k, £30k, £35k, £40k annual cash flows.
PV Year 1: £20,000 ÷ 1.10¹ = £18,182
PV Year 2: £25,000 ÷ 1.10² = £20,661
PV Year 3: £30,000 ÷ 1.10³ = £22,539
PV Year 4: £35,000 ÷ 1.10⁴ = £23,905
PV Year 5: £40,000 ÷ 1.10⁵ = £24,837
Total PV: £110,124
NPV = £110,124 − £100,000 = +£10,124
A positive NPV of £10,124 at a 10% discount rate means this investment exceeds the hurdle rate. At 12%, NPV would be negative — the IRR lies between 10% and 12% (use the IRR Calculator to find it exactly).
Use this in your workflow
Use the IRR Calculator to find the discount rate at which NPV equals zero — this is the break-even return rate for the same cash flows. Use the ROI Calculator for simpler single-period return analysis. Use the Payback Period Calculator to find when the investment recoups its cost. Browse all Free Business Calculators.
When to use this calculator
- →Appraising a capital project or business investment against a required rate of return
- →Evaluating whether projected cash flows justify the initial investment cost
- →Building a financial model for a board memo, funding application, or investor presentation
- →Comparing two capital projects of similar scale on an absolute value basis
Worked example: equipment purchase NPV
A useful reference before entering your own figures above.
| Item | Value |
|---|---|
| Initial investment | $80,000 |
| Discount rate (cost of capital) | 10% |
| Year 1 savings / cash flow | $25,000 |
| Year 2 savings / cash flow | $28,000 |
| Year 3 savings / cash flow | $30,000 |
| Year 4 residual value | $15,000 |
| PV of cash flows | $83,284 |
| NPV | +$3,284 |
| Decision | Positive NPV — accept |
A positive NPV of $3,284 at a 10% discount rate means this equipment purchase marginally clears the hurdle rate. At 11%, NPV would be negative — use the IRR Calculator to find the exact break-even rate.
Limitations
NPV is highly sensitive to the discount rate chosen — a small change in rate can flip the decision. Cash flow forecasts are inherently uncertain; NPV should be run with sensitivity analysis across a range of discount rates and cash flow scenarios. NPV does not account for liquidity, financing structure, or investment risk beyond what is reflected in the discount rate. These results are for planning and illustrative purposes only — not financial advice.
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Frequently asked questions
What is NPV?
NPV (Net Present Value) is the sum of the present values of all future cash flows from an investment, minus the initial investment cost. A positive NPV means the investment returns more than the required discount rate. A negative NPV means returns fall short.
How is NPV calculated?
NPV = −Initial Investment + Σ [CF_t ÷ (1 + r)^t] for t = 1 to n. Each future cash flow is divided by (1 + r)^t to bring it to today's value. The sum minus the initial investment gives the NPV.
What discount rate should I use?
Use your required rate of return or cost of capital (WACC). Common ranges: 8–12% for infrastructure/property, 12–20% for business investments, 20–30%+ for startup-stage projects. A higher rate is more conservative.
What is the difference between NPV and IRR?
NPV shows the absolute value added at a specific discount rate. IRR shows the discount rate at which NPV equals zero. Use both: NPV gives scale, IRR gives efficiency.
What is a terminal value?
Terminal value is a lump sum received at the end of the investment horizon — for example, a property sale price or business exit valuation. It is added to the final year's cash flow and discounted back to present value.
Can NPV be used to compare investments?
Yes — but only for projects of similar scale and duration. For different-sized investments, use IRR to compare annualised returns, or use NPV per dollar invested to normalise.