Net Present Value (NPV) Calculator
Net present value of a constant annual cash flow against an upfront investment.
Results
Net present value
5474.56
Present value
55,474.56
Total
72,000.00
Profitability index
1.1095
What this tool does
Money arriving in five years is worth less than the same money today, and the discount rate is how much less. NPV applies that discount to every year of return and subtracts what you paid: a positive result means the investment beats simply earning that rate elsewhere.
Formula
NPV = Σ flow ÷ (1 + r)^t − investment
Variables
| Symbol | Meaning | Unit |
|---|---|---|
i0 | Initial investment | — |
cf | Annual cash inflow | — |
r | Discount rate | % |
n | Years | — |
NPV | Net present value | — |
PV | Present value | — |
TOT | Total | — |
PI | Profitability index | — |
Worked example
- Initial investment50,000
- Annual cash inflow12,000
- Discount rate8 %
- Years6
- Net present value5474.56
- Present value55,474.56
- Total72,000.00
- Profitability index1.1095
Limitations
- This is an informational calculator, not personalised financial advice. Rates, fees, taxes and contract conditions vary between institutions and countries.
- The result is an estimate based only on the values you type. Real situations often include factors this calculator does not know about.
- The tool works with whatever currency you use for the inputs; it does not convert between currencies.
Frequently asked questions
What discount rate should I use?
The rate you could earn elsewhere on money of comparable risk, or the rate your capital actually costs you. A business often uses its weighted cost of capital; an individual might use the interest on the loan that funds the purchase. The result is sensitive to this number, so it is worth running two or three rates rather than trusting one.