What is net present value?
Net present value, or NPV, measures the value today of a series of future cash flows. Future cash flows are discounted because money received later is usually worth less than money received today.
Investment appraisal
Interactive NPV calculator with cash flow diagrams.
Model an investment, shape each year’s cash flow, and see net present value, IRR, benefit cost ratio, discounted cash flow, cumulative cash flow, and equivalent annual value instantly.
Exact inputs
Annual cash flows
Year 0 is today. Later years are discounted using the rate above.
NPV calculator guide
Calculate net present value from annual cash flows
npv studio is an interactive net present value calculator for comparing investment scenarios. Enter the investment term, discount rate, and annual cash flows to see nominal cash flow, discounted cash flow, cumulative cash flow, NPV, IRR, benefit cost ratio, and equivalent annual value in one place.
NPV formula
The standard NPV formula is NPV = Σ Cash flowt / (1 + r)t, where r is the discount rate and t is the year of each cash flow.
Discounted cash flow
The discounted cash flow chart shows each annual cash flow after applying the selected discount rate. This helps show how the timing of costs and benefits changes the investment value.
Selecting a discount rate
The discount rate should reflect both the risk of the investment and the cost of capital available to fund it. From an investment banking perspective, the rate is not just a mathematical input; it is the required return for tying up scarce capital in a project with technical, commercial, operating, and execution risk.
Risk and hurdle rates
Riskier investments normally warrant higher discount rates because their cash flows are less certain. In capital-constrained situations, a higher discount rate can also act as a hurdle rate, filtering out projects that are less likely to generate enough risk-adjusted value to justify funding.
Equivalent annual value
Equivalent annual value converts the NPV into a constant annual amount over the investment term. This is useful when comparing projects with different lifespans or different cash flow timing.
Internal rate of return
Internal rate of return, or IRR, is the discount rate where the modelled cash flows produce an NPV of zero. It is useful for comparing the implied return of investment scenarios.
Benefit cost ratio
Benefit cost ratio, or BCR, compares the present value of positive cash flows with the present value of negative cash flows. A BCR above 1.00 indicates discounted benefits exceed discounted costs.
How to use the cash flow diagram calculator
- Set the investment term in years.
- Set the discount rate used for the NPV calculation. For higher-risk investments, consider a higher rate to reflect uncertainty, opportunity cost, and the return required by capital providers.
- Enter annual cash flows directly, drag the chart bars, or double-click a bar to type an exact value.
- Review the NPV, IRR, benefit cost ratio, discounted cash flow chart, cumulative cash flow line, and equivalent annual value.
- Copy the scenario link to share the same inputs with another user.
This calculator runs in the browser and is intended for planning, education, and investment appraisal support. It is not financial advice.