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NPV Calculator

Business

Net present value tells you whether a project earns more than your required return, in today’s money.

In short: The NPV Calculator is a free online tool that lets you judge a project by discounting its future cash flows to today — instantly, with charts, a worked example and the exact formula.

Your inputs

₹5,00,000
₹1₹10Cr

Upfront outlay at year 0.

/year
₹1,20,000
₹0₹10Cr

Cash the project returns each year.

% p.a.
130

Required rate of return.

yrs
140

Net present value

₹22,631

Worth it

Total inflows

₹7,20,000

Undiscounted

Initial investment

₹5,00,000

Cumulative discounted cash flow

When the project crosses zero, it has recovered its cost in today’s money.

Year-wise discounted cash flow

Year-wise discounted cash flow
YearCash flowDiscountedCumulative
1₹1,20,000₹1,09,091-₹3,90,909
2₹1,20,000₹99,174-₹2,91,736
3₹1,20,000₹90,158-₹2,01,578
4₹1,20,000₹81,962-₹1,19,616
5₹1,20,000₹74,511-₹45,106
6₹1,20,000₹67,737₹22,631

Each inflow discounted to today, then accumulated.

How the NPV Calculator works

Formula

NPV = Σ [ CFₜ ÷ (1 + r)ᵗ ] − Initial investment
CFₜ
Cash flow in year t
r
Discount rate (required return, as a decimal)
t
Year number, from 1 to project life
Σ
Sum across all project years

Step-by-step calculation

Worked with the default values.

  1. 1

    Initial outlay

    Cash flow at year 0

    = -₹5,00,000

  2. 2

    Present value of inflows

    Σ CashFlow ÷ (1 + r)ᵗ

    = ₹5,22,631

  3. 3

    Net present value

    PV of inflows − Initial investment

    = ₹22,631

How it works

  • Every future cash inflow is discounted back to today using the required rate of return.
  • The discounted inflows are summed and the upfront investment is subtracted.
  • A positive NPV means the project earns more than your hurdle rate and adds value; a negative NPV means it destroys value.

Examples

₹5,00,000 outlay returning ₹1,20,000/year for 6 years at 10%

NPV of about ₹22,600 — marginally worth it.

The same project appraised at a 15% discount rate

NPV turns negative, so a higher hurdle rate makes it unattractive.

Understanding the NPV Calculator

What NPV really measures

Net present value is the gold standard for deciding whether an investment or project is worth undertaking. It takes every rupee the project is expected to generate in the future, discounts each back to what it is worth today, and subtracts the upfront cost. The result is a single number that says, in today’s money, how much wealth the project creates above and beyond your required return.

The logic rests on the time value of money. A rupee earned five years from now is worth less than a rupee today, because today’s rupee could be invested and grow. By discounting future inflows at your required rate, NPV puts money arriving at different times on an equal footing and nets it against what you must spend now.

Reading the sign

The decision rule is refreshingly simple. If the NPV is positive, the project earns more than your discount rate and adds value — a green light. If it is negative, the project fails to clear your hurdle rate and destroys value. If it is exactly zero, the project earns precisely your required return, and the rate that produces this break-even is the internal rate of return.

What moves the number

Two inputs dominate the result:

  • The cash flows — how much the project returns each year and for how long.
  • The discount rate — a higher required return discounts distant inflows more heavily and pulls NPV down.

Because the discount rate has such leverage, a project that looks attractive at 10% can turn unattractive at 15%. Sensible analysts therefore test a range of rates rather than betting on one.

Using NPV wisely

NPV is powerful but only as good as its inputs. Cash-flow forecasts are estimates, and small changes in the discount rate can flip the decision. Treat a large, robust positive NPV as a strong signal and a thin one as a caution. Pair NPV with the internal rate of return and the payback period, and weigh the numbers against capital constraints, risk and strategic fit. Done well, NPV turns a fuzzy go/no-go question into a disciplined, value-based decision.

Pros

  • Directly measures the rupee value a project adds in today’s money.
  • Accounts for the time value of money and your required return.
  • Gives a clear accept/reject signal based on the sign of the result.
  • Lets you compare projects of different sizes and lifespans consistently.
  • Forms the backbone of disciplined capital budgeting.

Cons

  • Highly sensitive to the discount rate, which is often an estimate.
  • Requires reliable cash-flow forecasts that may prove wrong.
  • A single NPV figure hides the scale of the investment relative to its return.
  • Assumes cash flows can be reinvested at the discount rate.

Tips

  • 1Match the discount rate to the project’s risk, not just a generic company rate.
  • 2Run the NPV at a few discount rates to see how robust the decision is.
  • 3Compare NPV alongside IRR and payback for a fuller picture.
  • 4Be conservative and realistic with cash-flow projections.
  • 5Remember that a positive but tiny NPV leaves little margin for error.

Frequently asked questions

Everything you need to know about the NPV Calculator.

What is net present value?
NPV is the sum of a project’s future cash flows discounted to today, minus the initial investment. It measures how much value, in today’s rupees, a project is expected to create above your required return.
How do I interpret the NPV result?
A positive NPV means the project is expected to earn more than your discount rate, so it adds value and is generally worth pursuing. A negative NPV means it falls short of your hurdle rate.
What discount rate should I use?
Use your cost of capital or the return you require given the project’s risk. Many businesses use their weighted average cost of capital; a riskier project warrants a higher rate.
How is NPV different from IRR?
NPV gives a rupee value of the wealth created at a chosen discount rate, while IRR gives the single rate at which NPV becomes zero. NPV is generally preferred when the two disagree.
Why does a higher discount rate lower NPV?
A higher rate discounts future cash flows more heavily, so distant inflows contribute less today. As the rate rises, NPV falls, and beyond a certain point it turns negative.
What does an NPV of zero mean?
A zero NPV means the project exactly earns your required return — no more, no less. The discount rate that produces this break-even point is the project’s internal rate of return.
Does this calculator assume equal annual cash flows?
Yes, for simplicity it assumes the same inflow each year after the initial outlay. Real projects often have uneven flows; for those, each year’s cash flow should be discounted individually.
Should I always pick the project with the highest NPV?
Generally yes, since NPV directly measures value created. But also consider capital available, project risk, timing and strategic fit, which a single NPV figure cannot fully capture.

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