# NPV Calculator

## Online net present value (NPV) Calculator

\$
%

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