Net Present Value (NPV) Calculator
NPV tells you whether an investment creates or destroys value. Enter your discount rate and projected cash flows to find if a project is worth pursuing.
Understanding NPV
NPV Formula
NPV = -Initial Investment + CF₁/(1+r) + CF₂/(1+r)² + ... + CFₙ/(1+r)ⁿ. A positive NPV means the investment creates value above the hurdle rate. A negative NPV means it destroys value — you'd be better returning the money to investors or finding an alternative.
Choosing a Discount Rate
For personal decisions, use your opportunity cost (e.g. 7% for stock market returns). For business decisions, use the Weighted Average Cost of Capital (WACC). A higher discount rate makes future cash flows worth less today — a critical insight for long-term projects.
NPV vs IRR
IRR (Internal Rate of Return) is the discount rate that makes NPV = 0. It's the true return of the investment. Compare IRR to your hurdle rate — if IRR > hurdle rate, proceed. NPV is generally more reliable when comparing projects of different sizes.
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