NPV Calculator to Calculate Discounted Cash Flows

Net Present Value (NPV) Calculator Sign

This NPV calculator will help you to determine what net impact a prospective investment will have on future cash flows when accounting for the time value of money -- without having to deal with time-consuming present value tables.

And not only will the calculator instantly calculate the net present value of a prospective investment, but it will also generate a discounted cash flows chart showing how it arrived at its answer.

Plus, if you are doing sensitivity analysis (what-if scenarios), the calculator will provide you with a printer friendly report that you can print out and use for your comparisons.

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Net Present Value (NPV) Calculator

Calculate net present value of discounted future cash outflows and inflows.

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Selected Data Record:

A Data Record is a set of calculator entries that are stored in your web browser's Local Storage. If a Data Record is currently selected in the "Data" tab, this line will list the name you gave to that data record. If no data record is selected, or you have no entries stored for this calculator, the line will display "None".

DataData recordData recordSelected data record: None
Disc rate:Discount rate:Discount rate:Discount rate:

Discount rate:

Enter the rate you want the NPV Calculator to discount the entered cash flows. Note that the discount rate is also commonly referred to as the Cost of Capital. Enter as a percentage, but without the percent sign (for .06 or 6%, enter 6).

%
Begin year:Begin year:Year of initial investment:Year of initial investment:

Year of initial investment:

Optional. If you would like the calculator to populate the Year column with the actual year labels, enter the 4-digit year of the initial outflow (capital outlay). Otherwise leave blank. Note that if you make changes to this field after creating and/or completing the cash flow entry form, the entry form will be cleared. So be sure you are happy with this entry before creating and completing the entry form.

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# of yrs:# of years:Number of years to include:Number of years to include in form:

Number of years to include in form:

Enter the number of years you would like included in the outflow/inflow form. Optionally, if you entered a 4-digit start year you can enter the 4-digit end year. In either case, this is a required field. Note that if you make changes to this field after creating and/or completing the cash flow entry form, the entry form will be cleared. So feel free to enter more years than you think you might need as the calculator will simply ignore any extra blank years.

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Year entry column:

If you entered a 4-digit year above, then this column will be automatically populated with the appropriate years based on the year entered in the line above.

Outflow entry column:

Enter the initial outflow amount on the first line (required) and then on any subsequent lines where additional amounts were invested (enter as positive values). Note that numbers entered in this column are usually entered as negative values when using an NPV spreadsheet function, however this NPV Calculator converts the values to negative for you.

Inflow entry column:

Enter cash inflows in the years they are projected to be received. You must have at least one value in this column for the NPV calculation to begin.

Net CF:Net cash flow:Net cash flow:Net cash flow:

Net cash flow:

The is the sum of all outflows less the sum of all inflows.

# of years:# of years:Number of years:Number of years:

Number of years:

This is the total number of cash flow years that were included in the calculations -- which includes the year of the initial cash outflow.

NPV:NPV:Net Present Value:Net Present Value:

Net Present Value:

This is the total of all discounted cash flows (NPV). If this result is positive, the project is considered to be desirable. If the NPV is a negative number, the project is considered to be undesirable.

If you would like to save the current entries to the secure online database, tap or click on the Data tab, select "New Data Record", give the data record a name, then tap or click the Save button. To save changes to previously saved entries, simply tap the Save button. Please select and "Clear" any data records you no longer need.

Help and Tools

Learn

Net Present Value (NPV) and Discounted Cash Flow (DCF) method explained.

What is NPV?

The term NPV stands for Net Present Value, which is a Discounted Cash Flow (DCF) method used in forecasting the long run desirability of an investment (capital outlay).

Specifically, net present value discounts all expected future cash flows to the present by an expected or minimum rate of return. This expected rate of return is known as the Discount Rate, or Cost of Capital.

If the net present value of a prospective investment is a positive number, the investment is deemed to be desirable. On the other hand, if the net present value turns out to be a negative number, then the investment is deemed to be undesirable.

Furthermore, net present value analysis can also be used to determine which of two or more alternative desirable investments is the most desirable.

What is a Discounting?

Think of discounting as the opposite of compounding. In compounding, you take a present amount (principal) and compound the interest earnings into the future. Whereas discounting takes a future value and discounts it back to the present (principal).

To illustrate the difference between compounding and discounting, if you were to invest $100 today in an investment that paid a 10% annual return, and you wanted to know how much your investment would be worth 1 year from now, you would compound the interest by multiplying the principal by 1 plus the rate (100 x 1.10 = $110).

Conversely, if you wanted to know how much you would need to deposit today for your investment to grow to $110 in 1 year, you would discount the future value by dividing it by 1 plus the rate (110 ÷ 1.10 = $100).

What is the Discounted Cash Flow (DCF) Method?

In the case of net present value analysis, the DCF method takes each future cash flow and reduces the amount by how much of that cash flow represents interest earned if its principal portion were invested at the time investment originated.

Then, once all future cash flows have been discounted, to arrive at the net present value, you then sum all discounted cash flows and subtract that amount from the original amount invested.

How is the Discount Rate Determined?

Typically, when deciding what rate to use when discounting cash flows, the rate used is equal to the highest rate you know you could earn elsewhere.

For example, if you know of two other alternative investments (A & B) and if you know with a fair amount of certainty that you could earn 6% in alternative A and alternative B would earn 5%, then use alternative A as the rate for discounting cash flows.

Why is NPV Important?

To demonstrate the importance of net present value analysis, suppose I ask you for $1,000 today, and in exchange, I promise to pay you $200 per year for five years, and then give you an extra $100 in year six, as shown in the following cash flow chart:

YearYou Give Me
(Outflows)
I Pay You
(Inflows)
Now$1,000 
1 $200
2 $200
3 $200
4 $200
5 $200
6 $100
Totals$1,000$1,100

Now, if you were unaware of the effects of the time value of money on my proposal, you might say, "Wow! I could earn $100 without doing anything? Here's the $1,000!" But this is where the importance of NPV comes to light.

So is my hypothetical offer something you should consider accepting? Well, that depends on what annual rate of return you could earn if you chose to turn down my offer and invest the $1,000 somewhere else.

For example, using the net present value calculator, you will see that if you know you could earn a 5% annual return (entered as the discount rate) somewhere else, then taking me up on my offer will end up costing you $59.46 in interest earnings (the opportunity cost of giving me $1,000 today in exchange for my $1,100 in future payments, versus investing in a project offering a higher rate of return).

Schedule of Cash Flows Discounted at 5%
YearOutflowsInflowsNet
Cash
Flow
Dis-
counted
Cash Flow
0$1,000 -$1,000-$1,000
1 $200$200$190.48
2 $200$200$181.41
3 $200$200$172.77
4 $200$200$164.54
5 $200$200$156.71
6 $100$100$74.62
Totals:$1,000$1,100$100-$59.48

On the other hand, if you knew the most you could earn on any other alternative investment was a 2% annual return, then accepting my offer would result in a gain of $31.49 over what you could have earned.

Schedule of Cash Flows Discounted at 2%
YearOutflowsInflowsNet
Cash
Flow
Dis-
counted
Cash Flow
0$1,000 -$1,000-$1,000
1 $200$200$196.08
2 $200$200$192.23
3 $200$200$188.46
4 $200$200$184.77
5 $200$200$181.15
6 $100$100$88.80
Totals:$1,000$1,100$100$31.49

By the way, if you wanted to find out the average rate of return of my hypothetical offer, you could use the IRR Calculator -- which uses a variation of the Discounted Cash Flow method for determining the internal rate of return from a series of cash flows. Plugging the above cash flows into the IRR Calculator will reveal that my offer would yield a 2.99% average annual rate of return.

Adjust Calculator Width:

Move the slider to left and right to adjust the calculator width. Note that the Help and Tools panel will be hidden when the calculator is too wide to fit both on the screen. Moving the slider to the left will bring the instructions and tools panel back into view.

Also note that some calculators will reformat to accommodate the screen size as you make the calculator wider or narrower. If the calculator is narrow, columns of entry rows will be converted to a vertical entry form, whereas a wider calculator will display columns of entry rows, and the entry fields will be smaller in size ... since they will not need to be "thumb friendly".

Show/Hide Popup Keypads:

Select Show or Hide to show or hide the popup keypad icons located next to numeric entry fields. These are generally only needed for mobile devices that don't have decimal points in their numeric keypads. So if you are on a desktop, you may find the calculator to be more user-friendly and less cluttered without them.

Stick/Unstick Tools:

Select Stick or Unstick to stick or unstick the help and tools panel. Selecting "Stick" will keep the panel in view while scrolling the calculator vertically. If you find that annoying, select "Unstick" to keep the panel in a stationary position.

If the tools panel becomes "Unstuck" on its own, try clicking "Unstick" and then "Stick" to re-stick the panel.