NPV-IRR Calculator
Try an example
Your cost of capital, or the return you could get elsewhere at similar risk
Cash flow at the end of each year ($, negative for a cost)
- Year 1
- Year 2
- Year 3
- Year 4
Net present value at 9%
+$6,214.24
The project returns more than 9% a year: its cash flows are worth $6,214.24 more today than they cost.
- IRR
- 11.71%
- MIRR
- 10.66%
- Profitability index
- 1.06
- Payback (discounted)
- 3.1 yr (3.8 yr)
NPV is zero at a discount rate of 11.71%, the IRR. Any required return below it gives a positive NPV.
Year by year
| Year | Cash flow | Discount factor | Present value | Cumulative |
|---|---|---|---|---|
| 0 | −$100,000 | 1.0000 | −$100,000 | −$100,000 |
| 1 | $30,000 | 0.9174 | $27,523 | −$72,477 |
| 2 | $32,000 | 0.8417 | $26,934 | −$45,543 |
| 3 | $34,000 | 0.7722 | $26,254 | −$19,289 |
| 4 | $36,000 | 0.7084 | $25,503 | $6,214 |
Discount factor = 1 ÷ (1 + r)ᵗ. Cash flows are assumed to arrive at the end of each year; the cumulative column turns positive in the year of the discounted payback.
NPV at other discount rates
Discount rate (%) across · filled dot: your rate · open circle: IRR
Calculate the net present value of an investment's yearly cash flows at your discount rate, together with its internal rate of return, MIRR, profitability index and simple and discounted payback. When the cash flows change sign more than once, every IRR is shown.
Formula
Worked Example
At 9% the four cash flows are worth $27,523 + $26,934 + $26,254 + $25,503 = $106,214 today, $6,214 more than they cost, so the project beats a 9% alternative. NPV falls to zero at a discount rate of 11.71%, the IRR.
Frequently Asked Questions
What is a good NPV?
Any NPV above zero means the project earns more than the discount rate and adds value compared with the alternative. When projects exclude each other, choose the higher NPV rather than the higher IRR.
Why can NPV and IRR rank projects differently?
IRR is a percentage and ignores size: a $1,000 project returning 40% adds less value than a $100,000 project returning 15%. IRR also assumes cash is reinvested at the IRR itself. NPV measures value in dollars at your actual cost of capital, and MIRR corrects the reinvestment assumption.
What discount rate should I use?
The return you could earn elsewhere at similar risk: a company's weighted average cost of capital or hurdle rate, or for a personal decision the interest rate on your debt or your expected investment return. Riskier cash flows deserve a higher rate.
Common Mistakes
- !Discounting the initial investment: money spent today is already in present value.
- !Trusting a single IRR for cash flows that turn negative again later, such as a cleanup cost; they can have two IRRs or none.