Net Present Value Calculator
Net present value (NPV) is the cornerstone of discounted cash flow analysis: it tells you, in today's money, whether an investment is worth making. The idea rests on the time value of money, the principle that a dollar received in the future is worth less than a dollar held today, because today's dollar can be invested and earn a return. This calculator takes an initial investment, a discount rate and a stream of yearly cash flows, then discounts each future cash flow back to the present and subtracts the upfront cost. A positive result means the project is expected to add value at the rate you chose; a negative result means it falls short of that hurdle. Enter your own figures to compare projects, value a series of payments, or sense-check a capital budgeting decision. The discount rate is left fully editable because the right rate depends on your cost of capital and risk; the US Office of Management and Budget publishes the official rates federal agencies use for benefit-cost analysis in Circular A-94. Every figure here is computed deterministically from the standard NPV formula, shown in full below, with a worked example that reconciles exactly to the calculator so you can follow each step.
Net present value discounts each future cash flow to today and subtracts the upfront cost: NPV = sum of CF_t / (1 + r)^t, minus the initial investment. At an 8% discount rate, investing 10,000 for cash flows of 3,000, 4,000 and 5,000 returns an NPV of $176.29. A positive NPV adds value at the chosen rate.
Net present value formula
NPV = ( sum from t=1 to n of CF_t / (1 + r)^t ) - C_0
CF_t = cash flow in year t
r = discount rate per year (as a decimal)
t = year number, n = number of years
C_0 = initial investment at time zero
Each future cash flow is divided by (1 + r) raised to the power of its year, which shrinks cash that arrives further in the future. The discounted cash flows are summed and the upfront cost, which is not discounted because it happens now, is subtracted.
Worked example
A project costs 10,000 today and is expected to return 3,000 in year 1, 4,000 in year 2 and 5,000 in year 3, at a discount rate of 8%.
- Year 1: 3,000 / 1.08 = 2,777.78
- Year 2: 4,000 / 1.08^2 = 4,000 / 1.1664 = 3,429.36
- Year 3: 5,000 / 1.08^3 = 5,000 / 1.259712 = 3,969.16
- Present value of cash flows = 2,777.78 + 3,429.36 + 3,969.16 = 10,176.29
- NPV = 10,176.29 - 10,000 = 176.29
The NPV is positive (176.29), so at an 8% required return the project adds value. These are the calculator's default inputs, so the result above matches the widget exactly.
Discount factors at common rates
The discount factor is 1 / (1 + r)^t. Multiply a cash flow by the factor to get its present value.
| Year (t) | 5% | 8% | 10% | 12% |
|---|---|---|---|---|
| 1 | 0.9524 | 0.9259 | 0.9091 | 0.8929 |
| 2 | 0.9070 | 0.8573 | 0.8264 | 0.7972 |
| 3 | 0.8638 | 0.7938 | 0.7513 | 0.7118 |
| 4 | 0.8227 | 0.7350 | 0.6830 | 0.6355 |
| 5 | 0.7835 | 0.6806 | 0.6209 | 0.5674 |
Method and discount rate guidance: US Office of Management and Budget, Circular A-94.
Net present value calculator: frequently asked questions
What is net present value (NPV)?
Net present value is the sum of every future cash flow discounted back to today, minus the initial investment. It answers a single question: in today's dollars, does this project add more value than it costs? Because a dollar received in five years is worth less than a dollar today, each cash flow is divided by a growth factor based on the discount rate before it is added up.
What discount rate should I use?
The discount rate reflects the return you could earn elsewhere at similar risk, often your cost of capital or a required rate of return. The US Office of Management and Budget publishes real and nominal discount rates for federal benefit-cost analysis in Circular A-94 and its annual appendix. Private projects commonly use the weighted average cost of capital. There is no single correct rate, so this calculator leaves it as an editable input.
What does a positive or negative NPV mean?
A positive NPV means the discounted cash flows exceed the initial cost, so the project is expected to add value at the chosen discount rate. A negative NPV means it destroys value at that rate, and an NPV of zero means it exactly earns the discount rate. When comparing mutually exclusive projects, the one with the higher positive NPV is generally preferred.
How is NPV different from IRR?
NPV gives a dollar amount of value created at a discount rate you choose. The internal rate of return (IRR) is the single discount rate that makes NPV equal to zero, expressed as a percentage. NPV is usually the more reliable decision rule because IRR can give misleading or multiple answers when cash flows change sign more than once.
What is the net present value formula?
NPV = sum of CF_t divided by (1 + r) raised to the power t, for each period t, minus the initial investment. CF_t is the cash flow in period t, r is the discount rate per period, and t is the number of periods from today. The initial outlay at time zero is not discounted because it happens now.
Official sources
- Discount rate and net present value method for benefit-cost analysis: US Office of Management and Budget, Circular A-94 (Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs). As at 24 June 2026.
- Investing and time-value-of-money basics: US Securities and Exchange Commission, Investor.gov. As at 24 June 2026.
Reviewed by the CalculatorHub team, edited by James Graham, 24 June 2026. See our methodology. This is general information, not financial, tax, legal or investment advice.