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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Frequently 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.