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Net Present Value (NPV) Calculator

The Net Present Value (NPV) is a crucial financial metric used to evaluate the profitability of an investment or project. It calculates the present value of all future cash flows, both inflows and outflows, discounted at a specific rate (the discount rate or required rate of return), and subtracts the initial investment cost.

A positive NPV generally indicates that the projected earnings generated by a project or investment (in present value terms) exceeds the anticipated costs (also in present value terms). Therefore, a project with a positive NPV is considered potentially profitable and should be undertaken. Conversely, a negative NPV suggests that the project is likely to lose money and should be rejected.

How to Use the NPV Calculator:

  1. Initial Investment: Enter the total cost incurred at the beginning of the project or investment. This is usually a negative cash flow.
  2. Discount Rate (%): Input the annual required rate of return or the cost of capital for the investment. This rate reflects the time value of money and the risk associated with the investment.
  3. Cash Flows: For each period (e.g., year), enter the expected net cash flow (inflows minus outflows) for that period.

NPV Formula:

NPV = ∑ [Cash Flowt / (1 + r)t] – Initial Investment

Where:

  • Cash Flowt = Net cash flow during period t
  • r = Discount rate per period
  • t = Number of periods

NPV Calculation
















function calculateNPV() { var initialInvestment = parseFloat(document.getElementById("initialInvestment").value); var discountRatePercent = parseFloat(document.getElementById("discountRate").value); if (isNaN(initialInvestment) || isNaN(discountRatePercent)) { document.getElementById("result").innerHTML = "Please enter valid numbers for Initial Investment and Discount Rate."; return; } var discountRate = discountRatePercent / 100; var cashFlowElements = document.getElementsByClassName("cashFlow"); var totalPresentValue = 0; for (var i = 0; i 0) { resultHtml += "Interpretation: The investment is potentially profitable (Positive NPV)."; } else if (npv < 0) { resultHtml += "Interpretation: The investment is likely to result in a loss (Negative NPV)."; } else { resultHtml += "Interpretation: The investment is expected to break even (NPV is zero)."; } document.getElementById("result").innerHTML = resultHtml; }

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