📈

NPV & IRR Calculator

Calculate Net Present Value and Internal Rate of Return for investment analysis

$
%
Year 1:
$
Year 2:
$
Year 3:
$
Year 4:
$
Year 5:
$

NPV & IRR Calculator Guide

An NPV & IRR calculator evaluates projects or investments from a stream of cash flows. NPV discounts each flow at your required return, while IRR is the rate that makes NPV zero.

What is NPV & IRR Calculator?

The NPV & IRR calculator lets you enter dated or periodic cash flows, choose a discount rate, and compute NPV, IRR, payback, and profitability index to compare alternatives.

How to Use the NPV & IRR Calculator

  1. List cash flows in order (negative outlays, positive returns).
  2. Choose discount rate for NPV (e.g., WACC or hurdle).
  3. Calculate NPV and IRR; view payback and profitability index.
  4. Test sensitivities by changing the rate or scenario.
  5. Use XIRR mode for irregularly dated cash flows if available.

Formulas & Methods

  • NPV (periodic): NPV = sum over t=0..n of CF_t / (1 + r)^t
  • IRR: rate r* such that NPV(r*) = 0 (solve numerically).
  • Profitability Index: PI = (NPV + initial_outlay) / initial_outlay
  • Payback: first period when cumulative cash flow turns positive.

Assumptions & limitations

  • IRR may not exist or may be multiple when cash-flow signs change more than once.
  • Reinvestment at IRR is not realistic; NPV aligns with discount-rate reinvestment.
  • Taxes, inflation, and risk adjustments should be modeled in cash flows or rate.

Examples

Example A — Periodic flows
CF0 = -100,000, CF1..CF4 = 35,000.
NPV at 8% ~ -100,000 + 35,000*(1 - (1+0.08)^(-4))/0.08 ~ $19,889.
IRR ~ 13.0% (calculator solves numerically).

Example B — XIRR concept
Irregular dates shift discounting day counts; XIRR may differ from periodic IRR even with similar annualized returns.

| Metric | Meaning | |---|---| | NPV | Value added at discount rate | | IRR | Rate at NPV=0 | | PI | Value per $ invested |

Pro Tips & Best Practices

  • Use NPV to compare mutually exclusive projects; IRR can conflict.
  • For non-conventional cash flows, prefer NPV or MIRR.
  • Stress-test with sensitivity to discount rate and cash-flow variance.
  • Use XIRR when dates are irregular.

Related Calculators

FAQ

Q: What is NPV?

A: Net Present Value is the sum of discounted cash flows using a required rate (discount rate).

Q: What is IRR?

A: Internal Rate of Return is the discount rate that makes NPV equal to zero.

Q: Why can IRR be misleading?

A: Multiple sign changes can yield multiple IRRs; mutually exclusive projects should be compared with NPV.

Q: What is XIRR?

A: IRR with exact dates for irregular cash flows; it uses day-count conventions rather than equal periods.

Q: Which rate should I pick for NPV?

A: Use your opportunity cost or weighted average cost of capital (WACC) as the discount rate.

Compliance note: This article is for information only and not financial advice.

Call to Action

Enter your cash flows and discount rate to compute NPV and IRR—then compare scenarios and choose the project that adds the most value.