Finance calculator
Calculate NPV, payback period, and profitability index for any investment project. Core tool for capital budgeting decisions.
Cash outflow at start of project (Year 0).
Expected equal cash inflow per year.
Number of years cash flows are received.
Your cost of capital or required return rate.
Net Present Value (NPV)
$13,724
Positive = project creates value. Accept if > 0.
Formula verified 9 September 2026
PV of All Cash Flows
$113,724
Simple Payback Period
3.33
Profitability Index (PV / Investment)
1.137
Estimate only — not financial advice; lender terms, fees, and taxes vary. Read the full disclaimer ↓
Each year’s cash flow discounted back to today, with a running cumulative NPV. The year cumulative NPV turns positive is roughly the discounted payback point.
| Year | Cash Flow | Discount Factor | Present Value | Cumulative NPV |
|---|---|---|---|---|
| 0 | $-100,000 | 1.0000 | $-100,000 | $-100,000 |
| 1 | $30,000 | 0.9091 | $27,273 | $-72,727 |
| 2 | $30,000 | 0.8264 | $24,793 | $-47,934 |
| 3 | $30,000 | 0.7513 | $22,539 | $-25,394 |
| 4 | $30,000 | 0.6830 | $20,490 | $-4,904 |
| 5 | $30,000 | 0.6209 | $18,628 | $13,724 |
Estimates only — not financial, tax, or professional advice.
100% private — every number you enter is calculated in your browser and never sent to our servers.
What it calculates: Net Present Value (NPV), PV of All Cash Flows, Simple Payback Period, Profitability Index (PV / Investment).
Updated 5 June 2026 · Transparent assumptions
Discount each cash flow: PV = CF / (1+r)^t.
$100K investment, $30K/year x 5 years, 10% discount rate.
PV of $30K x 5 years
$113,724
NPV
+$13,724
Decision
ACCEPT
Payback
3.33 years
PI
1.137
Positive NPV of $13,724 means this project earns above the 10% hurdle rate.
Net present value exists to answer one question honestly: is this project worth more than what it costs, once you admit that money arriving later is worth less than money in hand today? A dollar you receive in five years can’t be invested in the meantime, carries the risk it never shows up, and buys less after inflation. NPV puts a precise price on that gap by discounting every future cash flow back to today and subtracting what you pay up front.
The result is a single dollar figure with a clean decision rule. On the default project — $100,000 out now, $30,000 a year for five years, discounted at 10% — the five inflows are worth $113,724 in today’s money, so the NPV is +$13,724. Positive means the project clears your 10% hurdle and adds value; zero means it merely breaks even at that rate; negative means it falls short. The number itself is the value created, measured in present-day dollars.
Of every input here, the discount rate deserves the most scrutiny, because it is applied to every year and compounds. The $30,000 arriving in year five is divided by 1.10⁵ — it counts for only about $18,628 at 10%. Raise the rate to 15% and that same year-five cash falls to roughly $14,915; the deeper future cash flows shrink fastest, and a project that looked attractive can turn negative without a single cash-flow estimate changing.
So the rate is not a formality to leave at a default. It should reflect your cost of capital — what the money could earn in a comparable-risk alternative. Businesses typically use their weighted average cost of capital (WACC); an individual might use the return on a similar investment. Riskier projects deserve higher rates, which is the model’s way of demanding a bigger margin before it says yes. Set it deliberately, because it carries more of the answer than almost anything else.
This tool reports three numbers on purpose, and they answer different questions. Simple payback — here 3.33 years — tells you how long until you recover the cash, which is intuitive but blind: it ignores the time value of money entirely and counts nothing that happens after you break even. It is a liquidity screen, not a value test. The profitability index (PV ÷ investment, 1.137 on the defaults) restates NPV as value per dollar invested, which is what you want when ranking projects competing for one limited budget.
The internal rate of return is the discount rate that would drive NPV to exactly zero — the project’s built-in yield. It is appealing as a single percentage, but it misleads with unconventional cash-flow patterns (it can produce multiple answers) and when comparing projects of very different scale, where a high-percentage small project can create less total value than a lower-percentage large one. When IRR and NPV disagree on which project to pick, NPV is the one to trust, because it measures dollars of value rather than a rate.
Two simplifications in this calculator are worth holding in mind. It assumes equal cash flows arriving at the end of each year; real projects are usually lumpy or front-loaded, and earlier cash is worth more, so an even-flow assumption can understate or overstate a project whose timing differs. For uneven flows, discount each year’s specific amount separately in a spreadsheet — the cumulative-NPV column in the table above shows the principle, marking roughly when discounted cash finally repays the investment.
The most common conceptual error is mixing nominal and real figures: if your cash flows already include expected inflation, discount with a nominal rate; if they are in today’s purchasing power, use a real rate. Pairing real cash flows with a nominal rate (or vice versa) silently distorts the result. NPV is only as trustworthy as its inputs — treat the output as a structured aid to a decision, not a guarantee, and stress-test the discount rate and cash-flow estimates on anything high-stakes.
A positive NPV means the project is expected to generate more value than its cost of capital, so the general rule is to accept it. A zero NPV means it breaks even exactly at your discount rate, and a negative NPV means it is expected to fall short of your required return. The size of a positive NPV is the value, in today’s dollars, the project is expected to add.
Use the return you require for the risk involved, often your cost of capital. Businesses commonly use their weighted average cost of capital (WACC); an individual might use the return available on a comparable investment. Because the rate is applied to every year and compounds, even a small change can flip the decision, so pick it deliberately.
The profitability index (PI) is the present value of the cash flows divided by the initial investment. A PI above 1 means each dollar invested returns more than a dollar in present-value terms, equivalent to a positive NPV. It is most useful when ranking several projects competing for a limited budget, because it expresses value per dollar invested.
Payback period measures how long until you recover the initial cost, which is easy to grasp but ignores the time value of money and any cash flows after payback. NPV discounts every cash flow and accounts for the project’s full life. Use payback as a quick screen and NPV as the actual accept-or-reject test.
The internal rate of return (IRR) is the discount rate at which NPV equals zero. If your discount rate is below the IRR, NPV is positive. IRR is intuitive as a percentage, but it can be unreliable with unconventional cash-flow patterns or when comparing projects of different scale, so NPV is usually the more dependable signal.
Either works, as long as you stay consistent. If your cash flows include expected inflation (nominal), use a nominal discount rate. If they are in today’s purchasing power (real), use a real rate. Mixing the two, such as real cash flows with a nominal rate, is a common error that distorts the result.
This calculator assumes an equal cash flow every year for simplicity. Real projects often have uneven or front-loaded cash flows, which can meaningfully change the NPV. For those, discount each year’s specific amount separately in a spreadsheet. The principle is the same; only the per-year inputs differ.
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Investment disclaimer
Returns are assumptions, not guarantees. Actual results may vary because of market performance, taxes, fees, inflation, and timing. This is an educational projection, not investment advice.
How we calculate · Found an error? email us
Published 9 September 2026