NPV (Net Present Value) Calculator
Compute project Net Present Value (NPV) from a cash flow series and discount rate. Decide if a project adds value (NPV > 0).
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How Net Present Value works
Net Present Value (NPV) takes every future cash flow, discounts it back to today, and adds the initial investment: NPV = Σ FC_t / (1+i)^t − I₀. The discount rate i stands for the opportunity cost of capital. In practice that's usually the company's WACC, the project's hurdle rate, or some benchmark like Selic plus a risk premium. When NPV comes out positive, the project earns more than investors demand; when it's negative, value is being destroyed.
Say you invest R$ 100,000 today and collect R$ 30,000 a year for five years, discounting at 10%. The discounted inflows add up to about R$ 113,724, so NPV ≈ R$ 13,724. Accept it. Push the rate to 13% and NPV drops to roughly R$ 5,500; at 16% it turns negative and you'd reject the project. The rate at which NPV hits exactly zero is the project's IRR.
Where NPV is used
It runs through corporate capex decisions, DCF valuation (the dominant equity valuation method since Modigliani-Miller), real estate projects, M&A target screening, and energy projects with long horizons. CFA and MBA finance courses tend to teach it first when the question is how to rank mutually exclusive projects.
FAQ
Why pick NPV over IRR? NPV is measured in money and you can add it up across projects. IRR is a rate, and it can be undefined, come out with multiple values, or mislead you whenever the cash flows change sign more than once.
What discount rate should I use? For a firm, a blend of the cost of debt and equity (WACC). Otherwise, the next-best return you could earn on capital of similar risk. Brazilian projects often tack on a country-risk premium over a US benchmark.
Does NPV include taxes? It should, so feed it after-tax cash flows. A pre-tax NPV overstates returns. Depreciation tax shields and tax-loss carryforwards belong inside the FC_t.
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The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.