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NPV and IRR (For Investment Decisions)
This calculator helps you decide if an investment project is good.
You enter the cost today and the cash you expect to receive in future years. The calculator shows NPV and IRR.
If NPV is positive, the project usually adds value. If NPV is negative, the project usually destroys value.
Key idea
NPV = today’s value of all future cash flows minus the initial cost. IRR = the discount rate that makes NPV equal to zero.
Step 1 – Enter your numbers
Choose your currency. Use a negative number for the initial investment (money you pay out today).
Step 2 – See results
Internal Rate of Return (IRR)
IRR is the discount rate that makes NPV = 0. If IRR is higher than your required return, the project is usually good.
Cash flows (summary)
| Year |
Cash flow |
Present value |
Example (new machine)
A company pays ¥500,000 today for a machine. It expects to receive ¥200,000 at the end of each of the next 3 years. The required return is 8%.
- Initial investment: -500,000
- Discount rate: 8%
- Year 1: 200,000 · Year 2: 200,000 · Year 3: 200,000
In this example, if NPV is positive, the machine is a good investment. If IRR is above 8%, the project adds value.
Key words
- NPV (Net Present Value)
- Today’s value of all future cash flows minus the initial cost. Positive NPV means the project adds value.
- IRR (Internal Rate of Return)
- The discount rate that makes NPV equal to zero. If IRR is higher than your required return, the project is usually good.
- Discount rate
- The rate you use to bring future cash back to today’s value. It reflects risk and opportunity cost.