NPV & IRR Calculator — Net Present Value and Rate of Return

Enter what a project costs today and what it returns period by period. Get net present value, internal rate of return, profitability index and payback period — plus a table showing every flow discounted back to today.

Discounted cash flow table

How this calculator works

Net present value discounts every future cash flow back to today and subtracts the initial outlay. The formula is NPV = Σ F_t ÷ (1 + r)^t, where F_t is the cash flow in period t and r is your discount rate. The initial investment sits at t = 0, so it is added at full value with no discounting. Positive NPV means the project beats your required return; zero means it exactly matches it; negative means it destroys value relative to simply leaving the money in your next-best option.

Internal rate of return is the one number that makes NPV equal zero. There is no closed-form solution for a general cash flow series, so this calculator searches for it numerically: it scans discount rates from −99% upward for a sign change in NPV, then bisects repeatedly to narrow the rate to within a fraction of a basis point. Search matters rather than formula: IRR can be absent when flows never change sign, and there can be more than one IRR when they change sign repeatedly.

Profitability index divides the present value of future flows by the initial cost, ranking projects by value per dollar invested. Payback counts how many periods of nominal cash flow are needed to recover the outlay — it ignores the time value of money, which is exactly why it is shown alongside NPV rather than instead of it.

Choosing inputs that mean something

The discount rate is doing most of the work in any NPV calculation, and it should be an opportunity cost rather than a guess. A company uses its weighted average cost of capital for average-risk projects and a premium for riskier ones; an individual compares against what the same money would earn elsewhere at comparable risk. Test sensitivity by re-running at several rates — a project whose NPV swings from strongly positive to strongly negative between 8% and 15% deserves more scrutiny than the size of its headline return suggests.

Cash flows should be incremental and after tax, counting only what changes because you took the project. Two mistakes dominate real-world models: including sunk costs already spent before the decision, and forgetting working capital or maintenance spending that arrives mid-project. Uneven spacing is another trap — if your flows are monthly rather than yearly, either convert the period count into years or treat each row as one month and use a monthly discount rate.

Frequently asked questions

What does NPV tell me?

Net present value is the value today of all future cash flows minus what you pay now, discounted at your required rate of return. Positive NPV means the project beats that required return and adds value; negative means it destroys value even if the nominal cash returned exceeds what you spent. For a project costing $100,000 and returning $30,000, $40,000, $50,000 and $60,000 over four years, discounted at 10%, NPV is about +$38,877 — accept it. Raise the discount rate to 25% and NPV turns slightly negative, showing that the same physical project is simply not worth doing against a higher opportunity cost.

What is the difference between NPV and IRR?

NPV answers "does this beat my required return," giving a dollar figure. IRR answers "what return exactly," giving a percentage — the discount rate at which NPV equals zero. IRR is easier to compare against a hurdle rate and easier to communicate, but it assumes interim cash flows can be reinvested at the IRR itself, which is often unrealistic, and it can misbehave when flows change sign more than once. When NPV and IRR rankings disagree between two projects, the NPV ranking is the one that maximizes value.

What discount rate should I use?

Use your opportunity cost: the return you would earn on the next best use of the same money at similar risk. For a company that is usually the weighted average cost of capital, adjusted upward for project-specific risk. For an individual it might be the return on a broad index fund or the interest rate on the debt used to fund the purchase. Higher risk means a higher discount rate, which lowers NPV — that is the mechanism, not a penalty. Compare sensitivity across rates rather than trusting one figure.

Why does my investment have no IRR?

IRR only exists when cash flows change sign at least once — typically a negative outflow followed by net inflows. If every flow is positive, or every future flow negative, no discount rate can bring NPV to zero, and this calculator reports IRR as not available. A project with several sign changes, such as equipment that requires costly remediation in its final year, can have multiple IRRs, in which case none of them should be used for decisions and NPV should carry the argument on its own.

What is the profitability index?

Profitability index is the present value of future cash flows divided by the initial cost. Above 1.0 means the project pays back more than it costs in present-value terms, exactly the same accept signal as positive NPV. Its advantage appears when capital is rationed: PI ranks competing projects by value created per dollar invested, so with a limited budget you fund the highest-scoring projects first. With no budget constraint and projects of very different sizes, NPV itself is the better ruler.

Are these the same as the Excel NPV and IRR functions?

IRR matches Excel closely, since both search numerically for the root. Excel's NPV function is subtly different: it assumes the first value in the range belongs to period 1, so a very common error is to include the initial outflow inside the range and thereby discount it. Here the outflow is entered separately as the investment at time zero and is never discounted. This calculator additionally reports the simple payback period, which Excel's NPV function does not calculate.

Last updated Oct 6, 2026 — results depend entirely on the inputs you supply, so sanity-check every assumption.

Estimates for general information only, not financial advice — see our disclaimer.

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