Enter your initial investment, discount rate and as many cash flow periods as your project requires. The calculator computes Net Present Value and Internal Rate of Return simultaneously. Free, no signup.
The cash outflow at the start of the project — entered as a positive number. This is the amount committed on day one: equipment purchase, down payment, project setup cost, or acquisition price. The calculator treats this as a negative cash flow at period zero.
The rate used to translate future cash flows into present-day values. For corporate projects, use your company’s Weighted Average Cost of Capital (WACC). For personal investments, use the return you could earn on an alternative of similar risk. The discount rate is the single most consequential input — a small change can swing NPV from positive to negative.
If you are unsure which rate to use, run the calculation at several rates (for example, 6%, 8% and 10%) to see how sensitive the result is to that assumption. A project that shows a positive NPV across all three is genuinely robust. One that tips negative at 9% is marginal.
Enter the net cash flow for each period — positive if the project generates cash, negative if it requires additional outlay. Add as many periods as your project requires using the Add Cash Flow button.
Use net cash flows, not accounting profit. Depreciation is not a cash flow and should not be included. Capital expenditures and working capital changes are cash flows and must be included.
NPV (Net Present Value): The total value the investment creates in today’s money, after discounting all future cash flows at your chosen rate and subtracting the initial investment. Positive means value is created. Negative means the investment costs more than it returns in present-value terms.
IRR (Internal Rate of Return): The annualised rate of return the investment generates — the specific discount rate at which NPV equals zero. Compare this against your required rate of return or hurdle rate. If IRR exceeds your hurdle rate, the investment clears the threshold. If it falls below, it does not.
A business is considering purchasing a delivery vehicle for $40,000. Expected net cash flows over five years:
| Year | Cash Flow |
|---|---|
| 0 | −$40,000 |
| 1 | +$12,000 |
| 2 | +$12,000 |
| 3 | +$11,000 |
| 4 | +$10,000 |
| 5 | +$8,000 |
Discount rate: 8%
Each cash flow is discounted at 8%:
Year 1: $12,000 / 1.08¹ = $11,111
Year 2: $12,000 / 1.08² = $10,288
Year 3: $11,000 / 1.08³ = $8,735
Year 4: $10,000 / 1.08⁴ = $7,350
Year 5: $8,000 / 1.08⁵ = $5,445
Sum of discounted cash flows: $42,929 NPV = $42,929 − $40,000 = +$2,929
The investment creates $2,929 of value above the 8% required return. It is acceptable — but only narrowly. A higher discount rate or slightly lower cash flows in years 4–5 would eliminate the surplus.
The calculator solves iteratively for the rate that makes NPV = 0. For this cash flow series, IRR = 9.7%
The investment generates a 9.7% annualised return. Against an 8% hurdle rate, it clears the threshold by 1.7 percentage points. This confirms the NPV result: acceptable, but not by a wide margin.
A narrow positive NPV or IRR just above the hurdle rate warrants scrutiny of the assumptions before committing:
Run these scenarios in the calculator by adjusting individual inputs. If the NPV turns negative under modest stress, the investment’s safety margin is insufficient.
| NPV | What it means |
|---|---|
| Positive | Investment creates value above your required return — accept |
| Zero | Investment earns exactly the required return — breakeven |
| Negative | Investment destroys value at the assumed discount rate — reject |
A larger positive NPV is always better when choosing between mutually exclusive projects. NPV directly measures how much wealth is created, making it the correct ranking criterion when you can only choose one option.
| IRR vs Hurdle Rate | What it means |
|---|---|
| IRR > Hurdle Rate | Investment earns more than required — accept |
| IRR = Hurdle Rate | Investment earns exactly the required return |
| IRR < Hurdle Rate | Investment earns less than required — reject |
When comparing two projects using IRR, choose the one with the higher IRR only if they have similar scale and cash flow timing. For projects of different sizes, IRR can rank them incorrectly — use NPV instead. A detailed explanation of when NPV and IRR disagree, and which metric to trust, is in the IRR guide linked below.
NPV measures how much value an investment creates in today’s money — a dollar amount. IRR measures the annual rate of return the investment generates — a percentage. Both are derived from the same cash flows but answer different questions. NPV tells you the size of the gain. IRR tells you the efficiency of the return.
Yes. If a project requires additional capital outlay in a future period — a planned equipment upgrade, a lease renewal cost, a remediation expense — enter that year’s net cash flow as a negative number. The calculator handles mixed-sign cash flow series correctly for NPV. Note that multiple sign changes in the cash flow series can produce multiple IRR values, in which case the IRR result should be treated with caution.
For corporate projects, use WACC. For personal investments, use your opportunity cost — the return available on an alternative of equivalent risk. If uncertain, run the calculation at 6%, 8% and 10% to test sensitivity. For a full discussion of discount rate selection methodology, see the NPV guide linked below.
IRR cannot be calculated if the cash flows never generate a positive cumulative total, or if the sign changes in the cash flow series produce multiple valid solutions. In these cases the calculator will indicate no IRR. The NPV result remains valid regardless.
Yes. Enter the purchase price as the initial investment, annual net rental income (rent minus expenses) as periodic cash flows, and the projected net sale proceeds in the final year. The resulting IRR is the unleveraged return on the property. For a leveraged analysis, enter only the equity down payment as the initial investment and reduce each year’s cash flow by the mortgage payment.
For the theory behind these metrics — how the discount rate is selected, what NPV limitations matter in practice, and when IRR is the right tool vs when it misleads:
👉 Net Present Value (NPV) Explained — formula, discount rate selection, worked example and limitations
👉 Internal Rate of Return (IRR) Explained — how IRR is computed, MIRR, private equity applications and when IRR gives the wrong answer
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