NPV Calculator
Calculate Net Present Value to evaluate investment profitability and make informed decisions.
Net Present Value Calculator
Determine if your investment will be profitable by calculating the present value of future cash flows
Understanding Net Present Value (NPV)
What is NPV?
Net Present Value (NPV) is a financial metric that calculates the difference between the present value of cash inflows and outflows over time. It accounts for the time value of money, recognizing that a dollar today is worth more than a dollar in the future.
Interpreting NPV Results
- NPV > 0: Accept - Investment adds value
- NPV = 0: Indifferent - Breaks even
- NPV < 0: Reject - Investment destroys value
- Higher NPV = Better investment opportunity
Profitability Index (PI)
- PI = PV of Future Cash Flows / Initial Investment
- PI > 1: Good investment (creates value)
- PI = 1: Break-even point
- PI < 1: Poor investment (destroys value)
- Useful for comparing projects of different sizes
Choosing Discount Rate
- WACC: Weighted Average Cost of Capital
- Hurdle Rate: Minimum acceptable return
- Opportunity Cost: Return from alternative investments
- Risk Premium: Add for riskier projects