Enter an initial investment and each year's expected cash flow to instantly calculate NPV, IRR, and payback period.
| Year | Cash flow |
|---|
Show calculation steps
How to use the investment appraisal tool
- Enter the initial investment required to start the project.
- Enter your discount rate, typically your cost of capital or required rate of return.
- Add a row for each year's expected cash flow, add or remove years as needed.
- Click Calculate to see NPV, IRR, and payback period at once.
How NPV, IRR, and payback period are calculated
NPV discounts every future cash flow back to today's value at your chosen rate, then subtracts the initial investment, a positive result means the project is expected to add value. IRR is the discount rate at which NPV would equal exactly zero, found here through iterative testing. Payback period is simply how many years of cumulative cash flow it takes to recover the initial investment, ignoring the time value of money.
Example
An initial investment of 100,000 generating 30,000 a year for 5 years, discounted at 10%, produces an NPV of roughly 13,724, an IRR of about 15.2%, and a simple payback period of 3.3 years.
Frequently asked questions
- What does a positive NPV mean?
- Discounted future cash flows exceed the initial investment, so the project is expected to create value.
- How is IRR calculated here without a financial calculator?
- Through iterative testing to find the discount rate where NPV equals zero.
- Why use NPV and IRR together instead of just one?
- NPV shows value created, IRR shows the effective rate of return; NPV is generally more reliable for comparing differently sized projects.
- Does this tool store or send my cash flow figures anywhere?
- No, all calculations happen locally in your browser.
Bookmark this page and run every major capital project through it before committing budget, a quick NPV and IRR check keeps decisions grounded in numbers rather than optimism.
0 Comments