NPV Calculator: Make Smarter Investment Decisions
Our NPV Calculator evaluates projects using Net Present Value, IRR, and cash flow discounting.
What is NPV?
Present value of inflows minus outflows. Positive NPV = profitable.
Key Metrics
- NPV: Absolute profit in today’s dollars
- IRR: Break-even discount rate
- PI: NPV per dollar invested
- Payback: Time to recover investment
Decision Rules
- NPV > 0 → Accept
- IRR > Discount Rate → Accept
- PI > 1 → Profitable
Example: $100K investment, 3 years
- Cash flows: $30K, $40K, $50K
- 10% discount → NPV = $10,520
- IRR = 18.8%
- Payback = 2.5 years
Formulas
NPV = Σ [CF_t / (1+r)^t] - Initial
IRR: Solve NPV = 0 for r
Why Use NPV?
- Accounts for time value of money
- Handles uneven cash flows
- Compare with IRR
Pro Tips
- Use conservative discount rate
- Include all costs
- Run sensitivity analysis
Limitations
- Assumes constant discount rate
- Estimates future cash flows
- IRR may have multiple solutions
Conclusion
Use NPV for sound capital budgeting. Start calculating now.