NPV Calculator

Net Present Value (NPV) = Present value of all future cash flows minus the initial investment. Positive NPV means the investment creates value above the required return. Negative NPV means it destroys value. NPV is the gold standard for capital budgeting decisions.

Use your WACC (Weighted Average Cost of Capital) for corporate projects, or your required rate of return for personal investments. If your business requires 12% return on investments, use 12%. Higher discount rates make future cash flows worth less — important for long-term projects.

IRR (Internal Rate of Return) is the discount rate at which NPV = 0. If IRR > your cost of capital/required return, the investment is worthwhile. If IRR < required return, reject it. NPV and IRR usually agree on accept/reject decisions but can conflict when comparing mutually exclusive projects (use NPV in that case).

Always trust NPV when they conflict. IRR can give misleading results for: non-conventional cash flows (multiple sign changes), mutually exclusive projects of different sizes or timing, projects with interim cash flows that must be reinvested. NPV directly measures value creation in dollar terms.

NPV requires accurately estimating discount rate and future cash flows — both are uncertain. It does not account for real options (ability to expand or abandon). It can favor larger projects over smaller, more efficient ones. It assumes cash flows are reinvested at the discount rate. Despite limitations, NPV remains the most rigorous investment metric.