💰 Net Present Value (NPV) Calculator
📊 Result Chart
📖 What is NPV (Net Present Value)
NPV (Net Present Value) is one of the most important investment evaluation metrics in financial analysis. It discounts future cash flows to their present value using a specified discount rate, then subtracts the initial investment to determine the net value of a project.
Formula
NPV = -C₀ + Σ(Cₜ / (1+r)^t)
Where: C₀ = Initial investment, Cₜ = Cash flow at period t, r = Discount rate, t = Time period
Decision Criteria
- NPV > 0: Investment is profitable, creates excess value
- NPV = 0: Investment breaks even, return equals discount rate
- NPV < 0: Investment is unprofitable, return below discount rate
Use Cases
- Corporate project investment decisions
- Real estate investment analysis
- Equipment purchase evaluation
- Startup valuation
- Bond pricing analysis
❓ FAQ
What is NPV (Net Present Value)?
NPV (Net Present Value) is the difference between the present value of cash inflows and outflows over a period of time. NPV greater than 0 indicates a profitable investment, NPV less than 0 indicates an unprofitable one, and NPV equal to 0 means the investment breaks even.
What is the NPV formula?
NPV = -C₀ + Σ(Cₜ / (1+r)^t), where C₀ is the initial investment, Cₜ is the cash flow at period t, r is the discount rate, and t is the time period. The discount rate reflects the time value of money and risk premium.
How to choose the discount rate?
The discount rate is typically chosen as: 1) Weighted Average Cost of Capital (WACC); 2) Industry average return; 3) Bank loan rate plus risk premium; 4) Minimum required return by investors. Generally 8%-15% for normal projects, 15%+ for high-risk projects.
What is the difference between NPV and IRR?
NPV gives the absolute value amount created by the investment, while IRR gives the percentage return rate. NPV is better for comparing projects of different scales, IRR is better for judging the return level of a single project. They are usually used together.
Is my data secure?
Completely secure. All calculations are done locally in your browser. No data is sent to any server, and no financial information is stored. Data is automatically cleared when you close the page.