nrtechstudio.com · Finance
NPV Calculator — Net Present Value, IRR & Pension Valuation
Value any investment project: enter cash flows, pick a discount rate (one rate or a different rate per year), and get NPV, IRR, MIRR, profitability index, and payback — plus a sensitivity table, a cash-flow timeline chart, and a dedicated pension NPV / lump-sum buyout mode. Everything runs locally in your browser.
Educational tool, not financial advice. NPV depends on your cash-flow estimates and discount rate — both are judgments, not guarantees. Verify important decisions with a qualified professional.
Project net present value
Initial cost at t=0, then one cash flow per year. Toggle variable rates to set a different discount rate for each year.
Cash-flow timeline
Year-by-year schedule
| Year | Cash flow | Discount factor | Present value | Cumul. PV |
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Sensitivity — NPV at different discount rates
How the decision changes if your required return is higher or lower. Your rate and the IRR are highlighted.
| Discount rate | NPV | Decision |
|---|
Pension net present value
Value a stream of pension payments today — or judge a lump-sum buyout offer against it.
Compare two projects
Same discount rate, two sets of cash flows. Enter yearly cash flows as comma-separated numbers.
Project A
Project B
| Metric | Project A | Project B |
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How NPV works
C₀ = initial investment · CFₜ = cash flow in period t · r = discount rate · n = number of periods
Each future cash flow is divided by (1+r)ᵗ — the discount factor — to express it in today's money. Money today is worth more than the same amount later because it can earn a return (and because of inflation and risk). Summing the discounted flows and subtracting what you pay up front gives the net value created. IRR is the rate r that makes this sum exactly zero.
Frequently asked questions
What is net present value (NPV)?
Net present value is the present value of all future cash flows from an investment minus the initial cost, all discounted back to today. NPV = Σ [CFₜ / (1+r)ᵗ] − C₀. A positive NPV means the project is expected to create value above your required return; a negative NPV means it destroys value. Every result on this page is computed live in your browser from this formula.
How do I calculate NPV? (worked example)
Take the initial investment, estimate each period's cash flow, pick a discount rate, then discount and sum. Example: invest $10,000 today, receive $4,000 per year for 3 years, discount rate 10%. Year 1: $4,000/1.10 = $3,636.36; Year 2: $4,000/1.10² = $3,305.79; Year 3: $4,000/1.10³ = $3,005.26. Sum = $9,947.41, minus $10,000 = NPV of −$52.59. Slightly negative: the project just misses the 10% hurdle. These exact figures are produced by this calculator's engine.
What discount rate should I use?
Use your cost of capital or minimum required return: for companies, the WACC (often 8–12%); for personal investing, the return of your next-best alternative. NPV is sensitive to it — the $10,000 project paying $4,000/year for 3 years has an NPV of +$892.99 at a 5% discount rate, −$52.59 at 10%, and −$867.10 at 15% (all computed by this tool). Try the sensitivity table to see the full curve.
What is the internal rate of return (IRR)?
IRR is the discount rate that makes NPV exactly zero — the project's effective annualized return. This calculator solves it by bisection. Example: invest $10,000 and receive $3,000, $4,200, and $6,800 over three years; the IRR is 16.34%. If your required return is below 16.34%, the NPV is positive and the project clears your hurdle.
NPV vs IRR — which should I trust?
Use both, but let NPV break ties. Both agree on a single project: the $10,000 investment paying $4,000/year for 3 years has an IRR of 9.70% and a negative NPV at a 10% discount rate (−$52.59), so both say reject. They can disagree when ranking projects of different sizes or with unconventional cash flows — IRR is a percentage and can favor small, fast paybacks, while NPV measures absolute value created. When they conflict, NPV is the safer rule for maximizing wealth.
What is the profitability index?
The profitability index (PI) = present value of future cash flows ÷ initial investment. A PI above 1.0 means a positive NPV. Example: the project with cash flows of $4,000, $4,500, $5,000 at a 10% discount rate has a present value of $11,111.95 against a $10,000 cost, so PI = 1.111 — each dollar invested returns $1.11 in present-value terms. PI is handy for ranking projects when capital is rationed.
What is the discounted payback period?
Discounted payback is how long it takes for the discounted cash flows to repay the initial investment — unlike simple payback, it respects the time value of money. Example: invest $10,000, receive $4,000/year for 4 years at a 10% discount rate; the discounted payback is 3.02 years, versus 2.50 years for simple payback. Use it as a liquidity/risk check alongside NPV, not as a replacement.
What is MIRR and why does it exist?
The modified internal rate of return fixes IRR's unrealistic assumption that interim cash flows are reinvested at the IRR itself. MIRR compounds positive cash flows at a reinvestment rate and discounts negative ones at a finance rate. Example: invest $10,000, receive $3,000, $4,200, $6,800 with a 10% finance rate and 12% reinvestment rate — MIRR is 15.15%, slightly below the 16.34% plain IRR. This calculator shows both.
Can the discount rate change from year to year?
Yes — enable variable discount rates and set a different rate per period. It matters: $5,000/year for 2 years on an $8,000 investment has an NPV of $1,297.05 at a flat 5%, but only $1,171.08 when the rate rises to 8% in year 2 (computed here). Use rising rates when you expect higher risk or higher interest rates later in the project.
How do I calculate the net present value of a pension?
A pension is an annuity, so its NPV is the present value of the payment stream: PMT × [1 − (1+r)⁻ⁿ] / r. Example: $24,000 per year for 20 years at a 5% discount rate is worth $299,093.05 today (payments at the end of each year). Switch to the Pension mode in this calculator to value monthly or annual pensions, with optional annual payment growth and payments at the start of each period.
Should I take a lump-sum pension buyout?
Compare the lump sum to the pension's present value at your personal discount rate. Example: a $24,000/year, 20-year pension at 5% is worth $299,093.05 today. A $250,000 lump-sum offer leaves $49,093.05 of value on the table — keeping the pension is better at 5%. The equivalent return of taking the pension instead of the lump sum is 7.22% per year (the buyout IRR). If you can reliably earn more than 7.22% elsewhere, the lump sum wins.
What does it mean if NPV is exactly zero?
An NPV of zero means the project earns exactly your discount rate — no more, no less. You are fully compensated for the time value of money and the risk priced into the rate, but no surplus value is created. The IRR equals your discount rate in that case. Accepting is a neutral decision financially; it usually comes down to strategic reasons.
Free tool by NRTechStudio