Last updated October 5, 2026 · Report an error
Net Present Value (NPV) answers a more rigorous question than a simple payback period: accounting for the time value of money, does an investment actually create value? A positive NPV means yes; a negative NPV means the investment destroys value relative to the discount rate used.
This calculator assumes a constant annual cash flow (present-valued as an ordinary annuity) rather than requiring a different cash flow figure for every individual year.
How it works
Enter the initial investment, expected constant annual cash flow, discount rate, and number of years. The tool present-values the stream of cash flows using the discount rate, then subtracts the initial investment to get NPV.
- Enter initial investment.
- Enter expected annual cash flow.
- Enter discount rate (%).
- Enter number of years.
- Click Calculate to see your results.
Examples
A marginally unprofitable investment
A $100,000 investment generating $25,000/year for 5 years at an 8% discount rate has a slightly negative NPV of about -$182 — essentially break-even, but not quite clearing the required return.
Who should use it
- Evaluating whether a capital investment clears your required rate of return.
- Comparing investment options on a like-for-like, time-value-adjusted basis.
Industry applications
- Capital budgeting and investment analysis
- Corporate finance
Advantages
- Accounts for the time value of money, unlike a simple payback period calculation.
- Gives a clear positive/negative verdict on whether an investment adds value.
Limitations
- Assumes a constant annual cash flow — doesn't model cash flows that vary year to year.
Common mistakes to avoid
- Comparing NPV results calculated at different discount rates as if they were directly comparable.
- Assuming a positive raw (undiscounted) profit automatically means a positive NPV — discounting can flip the verdict.
Best practices
- Choose a discount rate that reflects your actual cost of capital or best alternative investment return, not an arbitrary number.
Tips
- Pair this with the Payback Period calculator — payback tells you how fast you recover your investment, while NPV tells you whether it's actually worth doing at your required rate of return.