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NPV & IRR Calculator · Net Present Value and Internal Rate of Return

Net present value (NPV) and internal rate of return (IRR) are the two standard tools for deciding whether a project, purchase or investment is worth doing when the money arrives over several years. They are used for rental properties, equipment, a new product line, a solar installation or buying a business, because both account for something that a simple profit figure ignores: a dollar received in five years is worth less than a dollar received today.
NPV converts every future cash flow into today's dollars using your required return (the discount rate) and subtracts what you pay up front. A positive NPV means the project earns more than the rate you demanded; a negative NPV means you would do better elsewhere. IRR is the yearly return the project itself produces: the discount rate at which the NPV becomes exactly zero. If the IRR is higher than your required return, the project clears the bar.
Enter the amount you spend today, your discount rate and the net cash flow you expect at the end of each year (negative numbers are allowed for years with extra spending). The calculator also shows the profitability index and both the simple and discounted payback periods, so you can see not only whether the project is worth it but also how long your money is tied up.
Cash you spend at the start of the project
Your cost of capital or the return you could earn elsewhere
Net cash in (or out, if negative) at the end of the year
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Discount Rate:

Detailed Breakdown

8 metrics
PRIMARY RESULT
$3,887.71
Net Present Value (NPV)
Decision at Your Discount Rate
Accept: it earns more than your required return
Internal Rate of Return (IRR)
24.89%
Profitability Index
1.39
Payback Period
2.6 years
Discounted Payback Period
3.1 years
Present Value of Future Cash Flows
$13,887.71
Total Cash Inflows (Not Discounted)
$18,000.00

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Calculation Formula

Standard Method

NPV = −Initial Investment + Σ [ Cash Flow in year t ÷ (1 + r)^t ] (t = 1 … N, r = discount rate) IRR = the rate r at which NPV = 0 Profitability Index = Present Value of Future Cash Flows ÷ Initial Investment Payback Period = years until the running total of cash flows turns positive (interpolated within the year) Discounted Payback = the same calculation using each cash flow discounted at the required return Cash flows are assumed to arrive at the end of each year. The IRR is found numerically; when the cash flows change sign more than once a project can have several IRRs, and the calculator warns you so you can rely on the NPV.

Benchmark Example:
A project costs $10,000 today and is expected to return $3,000, $4,000, $5,000 and $6,000 over four years. Your required return is 10%. • Present value of the cash flows: 3,000 ÷ 1.10 + 4,000 ÷ 1.10² + 5,000 ÷ 1.10³ + 6,000 ÷ 1.10⁴ = $13,887.71 • NPV: $13,887.71 − $10,000 = $3,887.71 → positive, so the project beats a 10% return • IRR: about 24.89% per year, well above the 10% you required • Profitability index: 13,887.71 ÷ 10,000 = 1.39 (each invested dollar returns $1.39 in today's money) • Payback: 2.6 years undiscounted and 3.1 years discounted at 10%

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Frequently Asked Questions

6 answers

Applicable Laws & Regulatory Standards

Internal Revenue Service & Securities and Exchange Commission

Official Legal Reference
Internal Revenue Code § 168 (Accelerated Cost Recovery System / MACRS)

Sets the depreciation schedules for business property. Depreciation deductions change a project's after-tax cash flows and therefore its NPV and IRR.

Internal Revenue Code § 179 (Election to Expense Certain Depreciable Business Assets)

Lets businesses deduct the cost of qualifying equipment in the year it is placed in service, which moves tax savings earlier in the cash-flow timeline.

SEC Marketing Rule — 17 CFR § 275.206(4)-1

Governs how investment advisers may present performance, including hypothetical and projected returns such as an IRR, requiring fair and balanced disclosure of assumptions.

Legal citations and statutes are provided for consumer transparency, analytical validation, and educational reference under U.S. consumer financial regulations. This tool is not a substitute for formal legal, accounting, or tax counsel.

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exploreReal-World Scenarios

When to Use This Calculator

Everyday financial situations where this tool gives you fast, accurate clarity:

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Capital Budgeting Decisions

Decide whether new equipment, a second location or a software build earns more than your cost of capital.

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Rental and Real Estate Investments

Weigh years of rental income and the eventual sale against the price you pay today.

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Compare Competing Projects

Rank projects by NPV and IRR instead of by total profit, so timing and size are accounted for.

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Long-Payback Purchases

Test whether savings from solar panels, efficiency upgrades or machinery really justify the upfront cost.

Related Calculators for Better Decisions
ROI Calculator · Return on Investment & Annualized ReturnFreelance Rate Calculator · Hourly Rate to Hit Your Income GoalBreak-Even Calculator · Break-Even Point in Units and RevenueEstimate your federal tax bracket and effective rate