NPV Calculator

Calculate the Net Present Value (NPV) and Profitability Index for your investment projects. NPV helps you determine whether an investment will generate value by comparing the present value of cash inflows to the initial investment cost.

Initial Investment (£)

Discount Rate (%)

Cash Flows by Year (£)

Year 1:

How to Use This Calculator

Enter the initial investment amount (the upfront cost of the project)
Input the discount rate (also known as the required rate of return or hurdle rate)
Add cash flows for each year of the project by clicking "Add Year"
Click "Calculate NPV" to see the results

Understanding the Results

Net Present Value (NPV): If positive, the investment is expected to generate value. If negative, it may destroy value.
Profitability Index (PI): A ratio above 1.0 indicates the project creates value. Higher values suggest better returns per pound invested.
Total Present Value: The sum of all discounted future cash flows, useful for comparing different investment sizes.

What is Net Present Value?

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 money today is worth more than the same amount in the future due to its earning potential.

NPV Formula

NPV = Σ [Cash Flow / (1 + r)^t] - Initial Investment

Where r is the discount rate and t is the time period (year).

Disclaimer

This calculator is provided for educational and informational purposes only. It should not be considered as financial advice. Always consult with a qualified financial advisor before making investment decisions. Past performance does not guarantee future results.