NPV Calculator

Online net present value (NPV) Calculator

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Cash Flow

cash flow
Year 1: $

Net Present Value

  • The net present value (NPV) is used for capital budgeting, or by investors to analyze the profitability of an investment project or plan.

    In case the NPV result of a project or investment is a positive number, that's mean the project or the investment will be positive.

    Formula:

    NPV =
    Rt
    (1 + i)t

    NPV = Net present value
    Rt = Net cash flow at time t
    i = Discount rate
    t = Time of the cash flow

    Profitability index formula:

    PI =
    PV of future cash flows
    Initial Investment

    PV means present value

  • For example, the initial investment is $1,000,000 with a constant monthly cash flow of $25,000 for five years, and assuming the discount rate is 8% calculate NPV.

    First the annual discount rate needs to be turned into a periodic or monthly rate, because we have monthly cash flow.

    So periodic rate = (1 + 0.08)(1 ÷ 12) - 1 = 0.64%

    NPV = -1,000,000 + [
    25,000
    (1 + 0.0064)1
    +
    25,000
    (1 + 0.0064)2
    +
    25,000
    (1 + 0.0064)3
    +
    25,000
    (1 + 0.0064)4
    +
    25,000
    (1 + 0.0064)5
    + ...] = -1,000,000 + 1,241,122.58 = 241,122.58

    Profitability index (PI) is

    PI =
    1,241,122.58
    1,000,000
    = 1.241