📊 NPV Calculator
Calculate the Net Present Value of an investment — find out whether expected future cash flows, discounted to today, exceed the initial cost and whether the investment creates or destroys value.
Enter your values
- PV of future cash flows€56,861.80
- Simple payback period4
- Profitability index113.72%
What this means
- NPV is +€6,861.80 — the investment creates value above the required return.
- Profitability index: 113.72% (above 100% means value-creating).
- Simple payback period: 4 years (undiscounted).
Visual results
Detailed breakdown
| Year | Cash flow | Present value | Cumulative NPV |
|---|---|---|---|
| 1 | €15,000.00 | €13,636.36 | -€36,363.64 |
| 2 | €15,000.00 | €12,396.69 | -€23,966.94 |
| 3 | €15,000.00 | €11,269.72 | -€12,697.22 |
| 4 | €15,000.00 | €10,245.20 | -€2,452.02 |
| 5 | €15,000.00 | €9,313.82 | €6,861.80 |
About this calculator
What this calculator does
This NPV (Net Present Value) calculator tells you whether the future cash flows an investment is expected to generate are worth more than the money you need to put in today. It discounts each year’s projected cash flow back to its present-day equivalent using your required rate of return, sums them up, and subtracts the initial investment. The result — the NPV — is the value an investment adds or destroys in today’s euros, after fully compensating you for the time value of money.
You can also enter a terminal value (also called salvage or residual value) to capture any lump sum — an asset sale, property disposal, or business exit — at the end of the investment period.
The formula
Net Present Value is calculated as:
NPV = Σ(t=1..n) [ CF / (1 + r)^t ] + TV / (1 + r)^n − C0
where:
- CF — the expected annual cash flow (assumed constant here)
- r — the discount rate (as a decimal, e.g. 0.10 for 10%)
- n — the number of years
- TV — terminal value at the end of year n
- C0 — the initial investment (cash outflow at t = 0)
The term 1 / (1 + r)^t is the discount factor for year t. It captures the core principle of time value of money: a euro received in the future is worth less than a euro today because today’s euro can be invested and earn a return.
How to interpret your results
- Net Present Value is the headline number. Positive means the investment creates surplus value beyond the required return; negative means it destroys value at your chosen discount rate. An NPV of exactly zero means the project earns precisely your required return — acceptable, but no surplus.
- PV of future cash flows is the total present value of every incoming cash flow, discounted to today. Comparing it to the initial investment directly shows whether you are getting more back (in today’s money) than you put in.
- Profitability Index = PV of cash flows ÷ initial investment × 100. Above 100% is value-creating. It is useful when comparing projects of different sizes: a small project with PI of 130% may be preferable to a large project with PI of 105%, even if the large project has a higher absolute NPV.
- Simple payback period is the number of years to recover the initial investment from undiscounted cash flows. It ignores time value and cash flows beyond the payback point, so treat it as a quick liquidity check rather than a standalone decision tool.
Common use cases
- Capital budgeting: deciding whether to build a new facility, buy equipment, or launch a product line by checking if the projected cash flows justify the upfront cost
- Real estate investment: comparing the present value of rental income (and eventual sale) against the purchase price at your required yield
- Business acquisition: valuing a target company by discounting its projected free cash flows and comparing the result against the asking price
- Project comparison: ranking multiple projects by NPV when capital is limited — allocate to the highest-NPV projects first
- Sensitivity analysis: running the calculator at several discount rates (optimistic, base, pessimistic) to understand how robust the investment decision is
Frequently asked questions
What does a positive NPV mean?
A positive NPV means the investment is expected to generate more value than it costs, after accounting for the time value of money. The NPV figure is the surplus value created in today's euros — a +€6,000 NPV means the project adds €6,000 of value beyond covering the required rate of return.
What discount rate should I use?
The discount rate should reflect the opportunity cost of capital — what you could earn in an alternative investment of similar risk. For a business, this is often the Weighted Average Cost of Capital (WACC). For personal investing, use your target annual return. A higher discount rate makes it harder for a project to show a positive NPV.
What is the difference between NPV and IRR?
NPV gives you a euro amount — the absolute value created or destroyed. IRR (Internal Rate of Return) gives you the discount rate at which NPV equals zero — the effective return of the project itself. NPV is generally preferred for decision-making because it measures actual value added. Use IRR to compare the project's return against your hurdle rate, but use NPV to decide whether to proceed.