The Net Present Value (NPV) is a crucial financial metric used to analyze the profitability of a potential investment or project. It calculates the present value of all future cash flows (both inflows and outflows) associated with an investment, discounted at a specific rate of return (often the company's weighted average cost of capital or a target rate). If the NPV is positive, it suggests that the projected earnings generated by the investment will be more than the anticipated expenses, making it a potentially worthwhile venture. Conversely, a negative NPV indicates that the investment is likely to result in a loss. A zero NPV means the investment is expected to earn exactly the required rate of return.
To calculate NPV, you need to:
Identify all cash flows (inflows and outflows) expected from the investment over its lifetime.
Determine the discount rate (required rate of return) for the investment.
Calculate the present value (PV) of each future cash flow using the formula: PV = Cash Flow / (1 + Discount Rate)^n, where 'n' is the period number.
Sum up all the present values of the cash flows.
Subtract the initial investment cost (if not already included as a negative cash flow in the first period) from the sum of the present values.
This calculator simplifies this process by allowing you to input the initial investment, the annual cash flows, and the discount rate.
.calculator-container {
font-family: Arial, sans-serif;
max-width: 700px;
margin: 20px auto;
padding: 20px;
border: 1px solid #e0e0e0;
border-radius: 8px;
background-color: #f9f9f9;
}
.calculator-container h2 {
text-align: center;
color: #333;
margin-bottom: 15px;
}
.calculator-container p {
color: #555;
line-height: 1.6;
margin-bottom: 20px;
}
.form-group {
margin-bottom: 15px;
}
.form-group label {
display: block;
margin-bottom: 5px;
font-weight: bold;
color: #444;
}
.form-group input[type="number"],
.form-group input[type="text"] {
width: calc(100% – 22px);
padding: 10px;
border: 1px solid #ccc;
border-radius: 4px;
box-sizing: border-box;
}
.calculator-container button {
background-color: #007bff;
color: white;
padding: 12px 20px;
border: none;
border-radius: 4px;
cursor: pointer;
font-size: 16px;
width: 100%;
margin-top: 10px;
transition: background-color 0.3s ease;
}
.calculator-container button:hover {
background-color: #0056b3;
}
.result-display {
margin-top: 20px;
padding: 15px;
background-color: #e9ecef;
border: 1px solid #ced4da;
border-radius: 4px;
text-align: center;
font-size: 1.1em;
color: #333;
font-weight: bold;
}
function calculateNPV() {
var initialInvestment = parseFloat(document.getElementById("initialInvestment").value);
var annualCashFlowsInput = document.getElementById("annualCashFlows").value;
var discountRate = parseFloat(document.getElementById("discountRate").value);
var resultElement = document.getElementById("result");
resultElement.innerText = ""; // Clear previous results
if (isNaN(initialInvestment) || isNaN(discountRate)) {
resultElement.innerText = "Please enter valid numbers for Initial Investment and Discount Rate.";
return;
}
if (annualCashFlowsInput.trim() === "") {
resultElement.innerText = "Please enter at least one annual cash flow.";
return;
}
var annualCashFlowsArray = annualCashFlowsInput.split(',').map(function(item) {
return parseFloat(item.trim());
});
for (var i = 0; i < annualCashFlowsArray.length; i++) {
if (isNaN(annualCashFlowsArray[i])) {
resultElement.innerText = "Please ensure all annual cash flows are valid numbers.";
return;
}
}
var discountRateDecimal = discountRate / 100;
var npv = -initialInvestment; // Start with the initial investment as an outflow
for (var i = 0; i 0) {
resultElement.innerText += " (Investment is potentially profitable)";
} else if (npv < 0) {
resultElement.innerText += " (Investment is potentially unprofitable)";
} else {
resultElement.innerText += " (Investment is expected to break even)";
}
}