Net Present Value Calculator: Evaluate Investment Profitability Instantly
Enter your upfront cost, forecast cash flows, and chosen discount rate to see whether the present value of returns beats the initial spend. A 2023 survey shows U.S. firms apply discount rates between 6 % and 12 % for capital projects (Berk & DeMarzo, 2023).
Net Present Value Calculator
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How to use the tool
Initial Investment – type the cash outlay required up front, e.g., 20 000 or 85 000.
Cash Flows – list expected inflows by period, separated with commas, such as 4 000, 6 000, 7 000 or 10 000, 12 500, 15 000, 17 500.
Discount Rate (%) – enter the rate reflecting risk and opportunity cost, for example 8 or 10.5.
Press “Calculate NPV” – the tool subtracts today’s cost from the discounted value of future inflows and shows a green (positive) or red (negative) figure.
Capital budgeting studies rank NPV as the “most reliable decision rule” (Brigham & Ehrhardt, 2022).
FAQ
What is Net Present Value?
Net Present Value is the difference between an investment’s cost and the present value of its expected cash inflows; a positive result signals value creation (Investopedia, 2023).
Finance texts advise using your project’s weighted average cost of capital; many U.S. firms fall between 6 % and 12 % (Damodaran, 2023).
When is NPV preferable to Internal Rate of Return?
NPV ranks mutually exclusive projects more reliably because it assumes reinvestment at the cost of capital, not at an often unrealistic IRR (Brigham & Ehrhardt, 2022).
Can you apply NPV in personal finance?
Yes—home purchases, education, or retirement projections can be valued by discounting net cash flows with a personal opportunity cost rate (CFI, 2022).
How often should cash-flow forecasts be updated?
Best practice is to revisit assumptions whenever market rates change by 1 percentage point or project scope shifts materially (PwC, 2021).
Does inflation change the calculation?
Use nominal cash flows with a nominal discount rate or real cash flows with a real rate; mixing bases skews NPV (IMF, 2020).
What are the main limits of NPV?
NPV relies on estimated cash flows and a single discount rate—errors in either input can mislead decisions (Investopedia, 2023).
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