NPV formula
Net present value is calculated as the sum of each cash flow divided by (1 + discount rate)period, minus the initial investment. A positive result means the modeled cash flows exceed the selected required return; it does not prove that the forecasts or rate are correct.
IRR requires careful interpretation
Internal rate of return is a rate that makes NPV equal zero. The calculator scans a wide rate range and reports when no solution or multiple solutions are detected. Non-conventional cash flows can produce several IRRs, so review the discounted cash-flow profile and use NPV, sensitivity analysis and decision context together.
Compare NPV and IRR or read how to choose and document a discount rate.
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Explore Strategic Finance, M&A and ValuationFrequently asked questions
How is NPV calculated?
NPV is the sum of each future cash flow discounted to present value minus the initial investment. A positive NPV indicates that the modeled return exceeds the selected discount rate.
What is IRR?
IRR is a discount rate at which the modeled NPV equals zero. Some cash-flow patterns have no IRR or more than one IRR, so IRR should be interpreted together with NPV and the underlying assumptions.
Which discount rate should I use?
The rate should reflect the decision context, timing, financing, risk and opportunity cost. This calculator is educational and does not select a rate or provide investment advice.