NPV & IRR Calculator
Calculate Net Present Value and Internal Rate of Return for a series of cash flows. Essential for investment and project analysis.
Written by Rahman · Last reviewed
Quick answer
NPV discounts each future cash flow back to today at your required rate: NPV = −C₀ + Σ CFₜ ÷ (1 + r)ᵗ. A positive NPV means the project beats that rate. IRR is the rate at which NPV equals zero. When the two disagree, NPV is the more reliable guide, because IRR implicitly assumes every cash flow is reinvested at the IRR itself.
NPV > 0 and IRR > discount rate → the project adds value. Separate cash flows with commas (e.g. 30000, 35000, 40000); the first flow lands one year out.
Results are estimates for general guidance and are not financial, tax or legal advice. Except where a calculator names a currency, figures carry no currency of their own: put in pounds and you get pounds back, put in rupees and you get rupees. Figures depend on the assumptions you enter and on rates that change over time. Check current rates and speak to a qualified adviser before acting on them.
About the NPV & IRR Calculator
Net Present Value (NPV) and Internal Rate of Return (IRR) are the two most used metrics in capital budgeting and investment analysis. NPV tells you the present-dollar value added by an investment: a positive NPV means the investment creates value over and above the required return (hurdle rate); a negative NPV destroys value.
IRR is the rate at which an investment breaks even in present-value terms, the discount rate that makes NPV equal to zero. If the IRR exceeds your hurdle rate (cost of capital), the investment is worth pursuing. Both metrics work together: NPV tells you how much value, IRR tells you the rate of return.
NPV = −C₀ + CF₁/(1+r)¹ + CF₂/(1+r)² + … + CFₙ/(1+r)ⁿ IRR: solve for r where NPV = 0
C₀ is the initial investment (entered as a positive number, sign is flipped). CF₁…CFₙ are the annual cash inflows. r is the discount / hurdle rate.
When NPV and IRR disagree, trust NPV
The two metrics usually rank projects the same way. When they diverge, the disagreement is not a tie to be split: NPV is the sounder guide, for reasons built into how IRR is defined.
- IRR assumes every interim cash flow is reinvested at the IRR itself. If a project shows a 40% IRR, that assumption is almost never realistic.
- IRR is a rate, so it is blind to scale. A 60% return on 10,000 beats a 25% return on 1,000,000 on IRR and loses badly on value created.
- A project whose cash flows change sign more than once can have multiple mathematically valid IRRs, or none at all.
- NPV is denominated in currency and is additive across projects, which IRR is not.
Use IRR to communicate: it is intuitive and everyone asks for it. Use NPV to decide.
The discount rate does most of the work
NPV is far more sensitive to the discount rate than to modest changes in the cash-flow forecasts, particularly for long-dated projects where distant flows are heavily discounted.
Because of that, the rate deserves as much scrutiny as the forecast. It should reflect the return available on comparable alternatives at comparable risk, not a round number chosen for convenience. Running the calculation at two or three rates and seeing where NPV crosses zero tells you more than a single point estimate.
Frequently Asked Questions
What discount rate should I use?
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The discount rate should reflect the risk and opportunity cost of the investment. For corporate projects, use the Weighted Average Cost of Capital (WACC). For personal investments, use your expected return from a comparable alternative.
Can NPV be negative and still be a good investment?
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Mathematically no: at that discount rate the investment underperforms. But if the discount rate was set too conservatively, or if there are strategic benefits not captured in cash flows, management may still proceed.
What if a project has multiple sign changes in cash flows?
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Multiple sign changes (positive → negative → positive) can produce multiple IRRs. In those cases, rely on NPV, which is always unambiguous. The Modified IRR (MIRR) also addresses this.
How do I interpret payback period alongside NPV/IRR?
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Payback shows liquidity risk: how soon you recover the initial investment. NPV and IRR focus on profitability. Use all three: a project can have an attractive NPV but tie up capital for 8 years (high payback risk).