NPV and IRR calculator
Enter what you pay today, the cash you expect at the end of each later period and the discount rate you require. The calculator returns the net present value, the internal rate of return, the simple and discounted payback periods and the profitability index. Periods can be years, quarters or months, as long as the rate matches them.
Runs in your browser: nothing you enter is sent anywhere.
How to use it
- Enter the discount rate: the return you require, per period.
- Enter the initial investment as a positive number; it is treated as money paid out at the start.
- Enter the cash flow for each period, with a minus sign for a payment. Use Add period for up to 20 periods.
- Read the NPV, IRR and payback figures.
How it works
Cash flow CF₀ is the negative of the investment, and CF₁, CF₂ … are the later flows.
- NPV = Σ CFₜ ÷ (1 + r)^t
- IRR is the rate r at which the NPV is zero. It is found with Newton’s method from 10%, falling back to a search for a sign change and bisection if Newton fails.
- Payback is the first time the running total reaches zero, with the final period split proportionally; discounted payback discounts each flow first.
- Profitability index = (NPV + investment) ÷ investment.
Worked example
Invest 100 and receive 60 at the end of each of two periods, with a required rate of 10%. The present values are 54.55 and 49.59, so the NPV is 4.13. The IRR solves 60x² + 60x − 100 = 0 with x = 1/(1 + r), which gives 13.07%. The simple payback is 1.67 periods, the discounted payback 1.92.
Tips
- Match rate and period. If cash flows are monthly, use a monthly rate.
- Cash flows are estimates. Check how the NPV changes at higher and lower discount rates.
- Do not rely on IRR alone. It ignores the scale of the project and can be ambiguous with irregular flows.
- Results are for decision support, not advice.
Frequently asked questions
What is net present value?
NPV adds up all future cash flows after discounting each back to today at your required rate, then subtracts the initial investment. With −1,000 now and 500, 400, 300 and 100 over four years at 10%, the discounted flows total 1,078.82, so the NPV is 78.82.
What is a good NPV?
Above zero means the investment earns more than your discount rate, so it adds value on those assumptions. When comparing projects of different sizes, the profitability index (present value of inflows divided by the investment) helps.
What is IRR?
The internal rate of return is the discount rate at which the NPV is exactly zero. For −100 now and 110 a period later it is 10%. If the IRR is above your required rate, the NPV at that rate is positive.
Why can the IRR be missing or have more than one answer?
If every cash flow has the same sign, no rate makes the NPV zero, so there is no IRR. If the sign changes more than once, several rates can solve it; the tool then shows a notice. Rely on NPV in those cases.
How is payback calculated?
Payback is the time until cumulative cash flow turns positive, assuming money arrives evenly within a period. With −100, then 60 and 60, it is 1 + 40 ÷ 60 = 1.67 periods. Discounted payback does the same with each flow discounted first.