Investment appraisal
NPV Calculator
The Net Present Value shows whether an investment still leaves something over once the cost of capital is taken out. Enter the figures and the result follows along — for constant returns or for individually dated payments.
One-off payment at time 0.
Number of years the calculation covers.
Income per year, staying the same.
Running payments per year.
Minimum return or cost of capital per year.
Proceeds at the end of the term, may be 0.
Net present value today
Worthwhile
The investment earns more than the discount rate of 8.0 %. The surplus is already discounted to today.
Internal rate of return
15.52 %
Payback
Year 5
Present value of returns
€12,200
Net present value over time
NPV = −€10,000 + €2,800 × 3.993 + €1,500 × 0.681 = €2,200
Present value per period
| Year | Cash flow | Factor | Present value | Cumulative |
|---|---|---|---|---|
| Year 0 | -€10,000 | 1.0000 | -€10,000 | -€10,000 |
| Year 1 | €2,800 | 0.9259 | €2,593 | -€7,407 |
| Year 2 | €2,800 | 0.8573 | €2,401 | -€5,007 |
| Year 3 | €2,800 | 0.7938 | €2,223 | -€2,784 |
| Year 4 | €2,800 | 0.7350 | €2,058 | -€726 |
| Year 5 | €4,300 | 0.6806 | €2,927 | €2,200 |
How the NPV Calculator Works
The net present value is calculated as the sum of all discounted future payments (present value) minus the initial investment. Each future payment is discounted to today using the discount rate. The formula is: NPV = -I₀ + Σ (Ct / (1+r)^t), where I₀ is the initial investment, Ct is the cash flow in period t, r is the discount rate, and t is the period. With constant cash flows the annual return stays the same over the term; with variable cash flows every payment carries its own date and amount.
Formula
NPV = −I₀ + Σ (Ct / (1+r)^t)
- I₀
- Initial investment
- Ct
- Cash flow in period t
- r
- Discount rate
- t
- Period
Frequently Asked Questions
- What is Net Present Value (NPV)?
- Net Present Value is the sum of all discounted future cash flows of an investment minus the initial investment. A positive NPV means the investment earns a return above the discount rate.
- How do you calculate NPV?
- NPV is calculated by discounting all future cash flows to the present using the discount rate. The formula is: NPV = -I₀ + Σ (Ct / (1+r)^t). The calculator above runs this computation on every keystroke and shows the working alongside it.
- What is a good NPV?
- An NPV greater than 0 (zero) is considered good. It means the investment yields a higher return than the discount rate. The higher the positive NPV, the more advantageous the investment.
- What is the difference between constant and variable cash flows?
- With constant cash flows, annual inflows and outflows stay the same across the whole term. With variable cash flows, every payment gets its own date and amount and is discounted to the day. Each is available as its own tab in the calculator.
- What discount rate should I use?
- The discount rate typically corresponds to the company's cost of capital or the expected minimum return. Often the long-term loan interest rate or the weighted average cost of capital (WACC) is used.