What this calculator measures
Evaluates investment profitability by discounting future cash flows to present value.
Common use cases
Use this model when the inputs describe the same decision, period and customer or product scope.
- Estimate net present value for an initial investment and level annual cash flows.
- Use the result with the recorded inputs: Initial investment, Annual cash flow, Discount rate, Years.
- Compare multiple scenarios before making a finance decision.
Formula
NPV = −Initial investment + Σ Cash flow ÷ (1 + rate)^t
Positive NPV means modeled discounted inflows exceed the initial outlay.
Worked example
Initial investment of $10,000 with discounted cash flows totaling $15,000 gives an NPV of $5,000.
How to interpret the result
Positive NPV indicates the project adds value.
Assumptions and limitations
- Discount rate reflects the true cost of capital.