NPV: Is a Project Worth More Than It Costs?
Net present value answers one question: are future cash flows, discounted for time and risk, worth more than the money you put in today?
What is the NPV Calculator?
Enter the initial investment, expected annual cash flow, project length, and discount rate, and the tool discounts each year and totals net present value. This is an estimate that assumes flat annual cash flow, so check current rates and real cash flow timing before investing.
How to use it
- Enter the initial investment.
- Enter annual cash flow, years, and discount rate.
- Click Calculate NPV.
Worked example
With 10000 invested, 3000 a year for 5 years at 10%, present value is about 11372.36 and NPV is about 1372.36.
Why discount future cash?
Money received later is worth less than money today, because it cannot be used or invested in the meantime, and the future is uncertain.
Frequently asked questions
What discount rate should I use?
Use a rate that reflects your cost of capital and risk. A higher rate makes future cash worth less today.
Is a positive NPV a guarantee?
No. It follows from your cash flow guesses, so wrong forecasts give a misleading NPV.