Calculate NPV and profitability index.
Enter the discount rate (your required rate of return or cost of capital), the initial upfront investment amount, and the expected cash flows for each future year.
Use Add Year to include additional years of cash flows. The calculator discounts each future cash flow back to its present value and subtracts the initial investment.
A positive NPV means the investment is expected to generate more value than it costs. The Profitability Index (PI) shows the return per dollar invested — values above 1.0 indicate a good investment.
Net Present Value formula:
NPV = −C₀ + Σ (Cₜ / (1 + r)^t)Profitability Index:
PI = (NPV + C₀) / C₀Where C₀ = initial investment, Cₜ = cash flow in year t, r = discount rate, and t = year number.
Example: A project costs $100,000 upfront with a 10% discount rate and expected cash flows of $30,000, $40,000, $45,000, and $50,000 over 4 years:
Use your cost of capital or required rate of return. For businesses, this is often the weighted average cost of capital (WACC), typically 8–12%. For personal investments, use your opportunity cost — what you could earn elsewhere.
A negative NPV means the investment’s expected returns are less than its cost when adjusted for the time value of money. The project would destroy value and should generally be rejected in favor of alternatives.
NPV gives a dollar amount of value created. IRR (Internal Rate of Return) gives the discount rate that makes NPV zero. NPV is generally preferred for decision-making because it accounts for project size and reinvestment assumptions.