Npv Calculator with Discount Rate

Net Present Value (NPV) Calculator

Calculate the current value of future cash flows to evaluate project profitability.

The upfront cost of the project or investment.

The annual rate used to discount future cash flows (WACC or Hurdle Rate).

Enter cash flows for Year 1, Year 2, Year 3, etc., separated by commas.

Net Present Value

Total Cash Inflow (Undiscounted):

Profitability Index:

Understanding Net Present Value (NPV)

Net Present Value (NPV) is a core financial metric used in capital budgeting and investment planning. It calculates the difference between the present value of cash inflows and the present value of cash outflows over a specific period of time. By accounting for the time value of money, NPV helps determine if a project will generate more value than its cost.

The NPV Formula

NPV = Σ [ Rt / (1 + i)^t ] – Initial Investment

• Rt: Net cash inflow-outflows during a single period t
• i: Discount rate or return that could be earned in alternative investments
• t: Number of time periods

Interpreting the Results

Evaluating the output of the NPV calculation is straightforward:

• Positive NPV (> 0): The projected earnings (in today's dollars) exceed the anticipated costs. Generally, the investment is considered profitable and should be accepted.
• Negative NPV (< 0): The investment will likely result in a net loss based on the discount rate used. Typically, these projects should be rejected.
• Zero NPV (= 0): The project breaks even. It earns exactly the discount rate required.

Example Calculation

Imagine you invest $10,000 today in a project. You expect to receive $4,000 at the end of Year 1, $5,000 at the end of Year 2, and $6,000 at the end of Year 3. If your discount rate (cost of capital) is 10%:

1. Year 1 PV: $4,000 / (1.10)^1 = $3,636.36
2. Year 2 PV: $5,000 / (1.10)^2 = $4,132.23
3. Year 3 PV: $6,000 / (1.10)^3 = $4,507.89
4. Total Present Value: $12,276.48
5. NPV: $12,276.48 – $10,000 = $2,276.48

function calculateNPV() { var initialInvestment = parseFloat(document.getElementById('initialInvestment').value); var discountRate = parseFloat(document.getElementById('discountRate').value) / 100; var cashFlowString = document.getElementById('cashFlows').value; // Clean and parse the cash flows var cashFlowArray = cashFlowString.split(',').map(function(item) { return parseFloat(item.trim()); }); if (isNaN(initialInvestment) || isNaN(discountRate) || cashFlowArray.some(isNaN)) { alert("Please enter valid numerical values for all fields."); return; } var totalPV = 0; var totalInflow = 0; for (var t = 0; t 0) { resultBox.style.backgroundColor = '#e8f6ef'; npvDisplay.style.color = '#27ae60'; statusLabel.style.color = '#27ae60'; interpretation.innerHTML = "Positive NPV: This project is likely a good investment."; interpretation.style.color = '#27ae60'; } else if (npv < 0) { resultBox.style.backgroundColor = '#fdf2f2'; npvDisplay.style.color = '#e74c3c'; statusLabel.style.color = '#e74c3c'; interpretation.innerHTML = "Negative NPV: This project might not meet the required rate of return."; interpretation.style.color = '#e74c3c'; } else { resultBox.style.backgroundColor = '#f4f4f4'; npvDisplay.style.color = '#7f8c8d'; statusLabel.style.color = '#7f8c8d'; interpretation.innerHTML = "Zero NPV: The project breaks even exactly at the discount rate."; interpretation.style.color = '#7f8c8d'; } }