NPV and IRR calculator
Money & financeHow much is an investment worth today?
Discount a list of yearly cash flows to today's money and find the rate at which the investment breaks even.
What you enter stays on your device while you use this tool. Opening a shared link sends the settings in its address to HowToolbox to prepare the page.
Cash flows
- €
- €
- €
- €
- €
- €
Money paid out is negative (−40,000), money received positive. One row per year, in order.
Net present value
€1,922.06
Internal rate of return 9.63%.
A positive NPV: the cash flows earn more than the discount rate.
Discounted payback in year 5.
Undiscounted total €13,700.00.
Present value by year
| Year | Cash flow | Discount factor | Present value | Cumulative |
|---|---|---|---|---|
| 0 | -€40,000.00 | 1.0000 | -€40,000.00 | -€40,000.00 |
| 1 | €8,000.00 | 0.9259 | €7,407.41 | -€32,592.59 |
| 2 | €9,200.00 | 0.8573 | €7,887.52 | -€24,705.08 |
| 3 | €10,000.00 | 0.7938 | €7,938.32 | -€16,766.75 |
| 4 | €12,000.00 | 0.7350 | €8,820.36 | -€7,946.39 |
| 5 | €14,500.00 | 0.6806 | €9,868.46 | €1,922.06 |
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Discount a list of yearly cash flows to today's money and find the rate at which the investment breaks even.
How to use
- Enter the discount rate: the yearly return you could earn elsewhere at similar risk.
- List the cash flows year by year: the investment as a negative amount, the money it brings in as positive amounts.
- Read the net present value and the internal rate of return, and check each year's present value in the table.
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How it works
Money today is worth more than the same money later, because today's money could already be earning a return. Net present value (NPV) turns every future cash flow into today's money and adds them up. A positive NPV means the investment beats the discount rate; a negative one means it does not.
NPV = Σ CFₜ / (1 + r)ᵗ, where CFₜ is the cash flow of year t and r the discount rate. The internal rate of return (IRR) is the rate r at which NPV is exactly zero.
These are the definitions behind Microsoft's NPV and IRR spreadsheet functions; turn off "First cash flow is today" to match the spreadsheet NPV, which discounts the first value too. When the cash flows change sign more than once, there can be several IRRs, and all of them are shown.
The result is only as good as the forecast and the rate you choose. It assumes equal periods and flows at the end of each year, and no taxes or inflation beyond what the rate already includes.
Worked example
What is the NPV of paying €1,000.00 today and receiving €1,200.00 in one year at 10%?
- €1,200.00 ÷ (1 + 10 ÷ 100) = €1,090.91.
- €1,090.91 − €1,000.00 = €90.91.
€90.91
Frequently asked questions
What discount rate should I use?
The return you would expect from another investment of similar risk, or your cost of borrowing. A higher rate lowers the value of later cash flows.
Why does a spreadsheet give a different NPV?
The spreadsheet NPV function treats its first value as one year from now. Turn off "First cash flow is today" to get the same number, or add the initial investment outside the function as the spreadsheet help suggests.
Why are there several IRRs, or none?
An IRR exists only when the cash flows include both money paid out and money received. If they switch between negative and positive more than once, more than one rate can make the NPV zero; then the NPV at your own rate is the better guide.
Can I enter a year with no cash flow?
Yes. Add a zero for that year so later payments stay in their correct periods.
Is the undiscounted total the same as NPV?
Only at a zero discount rate. Otherwise NPV also reflects when each payment arrives.
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