Cash flow by year
| Year | Cash flow | Remove row |
|---|---|---|
| 1 | ||
| 2 | ||
| 3 | ||
| 4 |
Result
NPV
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
NPV = −initial investment + the sum over each year of (that year's cash flow ÷ (1 + rate) ^ year number). Every future flow gets discounted more the further out it is — a dollar in 5 years is worth less than a dollar today, because today's dollar could be invested and earn a return.
The discount rate is the return an investor gives up by putting money into this project instead of the best available alternative with comparable risk. It's often a company's WACC (weighted average cost of capital).
NPV > 0 means the project returns more than an alternative at the same required rate would have — it's worth taking. NPV < 0 means the project destroys value even though money does come back, just slower than the discount rate demands.
The undiscounted total (a plain sum of the yearly flows minus the investment) is shown right next to NPV on purpose — the gap between the two is the price of time: how much the discount rate "eats" out of a nominally identical sum of money spread out over the years.