Net present value calculator

Net Present Value (NPV) measures the difference between the present value of cash inflows and outflows over a period of time. It helps investors and businesses determine whether a project or investment will generate more value than it costs.

A positive NPV means the investment is expected to make a profit, while a negative NPV suggests it may result in a loss.

How to use our NPV calculator

1. Enter your discount rate – The rate of return you expect (also known as the required rate of return).

2. Add your cash flows – List expected cash inflows and outflows for each period (e.g. year or month).

3. Include your initial investment – This is usually a negative number since it’s an outgoing payment.

4. View results – The calculator will instantly display the NPV of your investment.

Why NPV matters

• Investment Decisions: Helps you compare different projects on a consistent financial basis.

• Risk Assessment: Takes the time value of money into account, unlike simple profit calculations.

• Long-Term Planning: Useful for budgeting, capital expenditure, and strategic growth decisions.

Example

If you invest £10,000 today and expect to receive £3,000 each year for 5 years at a discount rate of 8%, the calculator will show the NPV as approximately £1,991 – meaning the project adds that much value in today’s terms.

Tips for Accurate Results

• Use realistic discount rates based on inflation, cost of capital, or required return.

• Include all relevant costs and benefits, even smaller or delayed ones.

• Remember that NPV is just one part of your decision-making process; consider other factors, such as risk, liquidity, and market conditions.