NPV discounts every future cash flow from an investment back to today’s dollars, sums them, and compares that total against what the investment costs upfront.
How it works
Net present value
NPV = Σ (cash flow in year t) ÷ (1 + r)ᵗ − initial investment
NPV is not a rate — this is the most common confusion around it
NPV answers “how much value, in today’s dollars, does this investment create above and beyond the return rate I could get elsewhere?” — not “what rate of return does this investment earn?” That second, related question is what the IRR calculator on this site answers instead; the two are complementary, not the same number expressed differently.
How to use this calculator
- Enter the upfront cost.
- List each year’s expected cash flow, separated by commas.
- Set a discount rate reflecting what the money could otherwise earn.
Frequently asked questions
What does a positive NPV actually mean?
The investment is expected to generate more value, in today’s-dollar terms, than simply earning the discount rate elsewhere — a genuine signal it’s worth considering at that rate, not a guarantee of the actual outcome.
Why does the discount rate matter so much to the result?
Because every future cash flow is divided by an increasingly large factor as the discount rate rises — a marginal investment can flip from positive to negative NPV purely from a change in discount rate, with no change to the cash flows themselves.
How is NPV different from just adding up the cash flows?
Simply adding cash flows treats a dollar received in year 10 as equal to a dollar received today — NPV explicitly does not, discounting later cash flows more heavily, which is the entire point of the calculation.
Can I enter negative cash flows partway through, like a second investment?
Yes — enter negative numbers for any year with a net outflow. The calculator sums whatever sequence of positive and negative flows you provide.
Should I use NPV or IRR to compare two investments?
They can disagree when comparing investments of different sizes or timing, and each answers a genuinely different question — NPV in dollar terms, IRR as a rate. Many practitioners use both together rather than relying on either alone.
