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NPV Calculator

Net Present Value · IRR · Payback Period · Profitability Index · Sensitivity Analysis

Investment Details

Enter initial investment, discount rate, and annual cash flows.

Initial Investment (₹)

₹

Enter as a positive number — treated as Year 0 outflow

Discount Rate (% per annum)

Cost of capital / required rate of return (WACC)

Annual Cash Flows

Negative values allowed for outflow years. Up to 15 years.

Net Present Value

₹0

NPV — Net Present Value

Inflows — Total Cash Inflows

Outflows — Total Outflows

Net CF — Net Cash Flow

NPV Formula Applied

Discounted Cash Flow Breakdown

Year	Cash Flow (₹)	Discount Factor (1/(1+r)^t)	Present Value (₹)

Shared Inputs for Advanced Tools (edit independently from Basic tab)

Initial Investment (₹)

₹

Discount Rate (% p.a.)

Annual Cash Flows

Internal Rate of Return (IRR)

IRR

—

IRR = r such that: Σ CF_t / (1+r)^t = 0
Solved using Newton-Raphson iteration (max 100 steps) with bisection fallback

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Payback Period & Profitability Index

Simple Payback

—

Nominal cash flows

Discounted Payback

—

PV-adjusted cash flows

Profitability Index

—

PI = PV of Future Cash Flows / Initial Investment
PI > 1 → Accept | PI < 1 → Reject | PI = 1 → Indifferent

Cumulative Cash Flow Table (★ = Breakeven Year)

Year	Cash Flow	Cumulative CF	Discount Factor	Cumulative DCF

Sensitivity Analysis

NPV at discount rates from 0% to 30% — the red dashed line marks the IRR (NPV = 0).

NPV at Key Discount Rates

Discount Rate	NPV (₹)	Decision

NPV vs. Initial Investment (±20%)

Investment Change	Investment (₹)	NPV (₹)	Decision

Worked Examples

Example 1 — Machine Purchase

Initial: ₹5,00,000 | Rate: 10% | Years: 5

CF: ₹1,50,000/yr × 5
PV = 1,50,000 × PVIFA(10%,5)
PVIFA = 3.7908
PV = ₹5,68,618
NPV = 5,68,618 − 5,00,000

NPV = ₹68,618 Accept ✓

Example 2 — Real Estate

Initial: ₹50,00,000 | Rate: 12%

Yr1: ₹3,00,000
Yr2: ₹5,00,000
Yr3: ₹8,00,000
Yr4: ₹10,00,000
Yr5: ₹60,00,000 (sale)
NPV = PV of flows − 50L

NPV ≈ ₹8.4L Accept ✓

Example 3 — Startup Project

Initial: ₹10,00,000 | Rate: 15%

Yr1: −₹2,00,000 (setup)
Yr2: ₹2,50,000
Yr3: ₹4,50,000
Yr4: ₹6,00,000
Yr5: ₹7,00,000
IRR ≈ 21.4%

NPV ≈ ₹2.1L Accept ✓

Key Formulas Reference

NPV = Σ [CF_t / (1+r)^t] − C₀
Disc. Factor = 1 / (1+r)^t
PV = CF_t × Discount Factor

IRR = r where NPV = 0
PI = PV of Flows / C₀
Payback = Year cumulative CF ≥ 0

C₀ = Initial Investment | CF_t = Cash Flow at year t | r = Discount Rate per period

Related Financial Calculators

What is Net Present Value (NPV)?

Net Present Value (NPV) is the cornerstone metric of modern capital budgeting. It quantifies, in today's rupees, the total value that an investment will create above and beyond the return demanded by investors. The core idea is simple: a rupee received in the future is worth less than a rupee in hand today, because today's rupee can be invested and earn a return. NPV discounts every future cash flow back to the present using a rate that reflects the opportunity cost of capital — and then subtracts the initial outlay.

The formula is: NPV = −C₀ + CF₁/(1+r)¹ + CF₂/(1+r)² + ... + CF_n/(1+r)^n where C₀ is the initial investment, CF_t is the cash flow in year t, and r is the discount rate. If NPV is positive, the investment earns more than the required return and creates value. If NPV is negative, it destroys value. If NPV is exactly zero, the project earns precisely the required return — no more, no less.

The Time Value of Money

The time value of money (TVM) is the principle that money available today is worth more than the same amount in the future. This happens for three reasons: inflation erodes purchasing power over time; money in hand can be invested to earn returns; and the future is uncertain — a promised cash flow carries risk of non-receipt. NPV formally incorporates TVM by discounting each cash flow: the further in the future, the greater the discount. A cash flow of ₹1,00,000 five years from now, discounted at 10%, is worth only ₹62,092 today.

Discounted Cash Flow (DCF) Analysis

Discounted Cash Flow (DCF) analysis is the broader framework under which NPV sits. DCF is used in investment banking, private equity, and corporate finance to value businesses, projects, and financial instruments. The analyst projects free cash flows for a forecast period — typically 5 to 10 years — and discounts them to the present at the Weighted Average Cost of Capital (WACC). A terminal value accounts for cash flows beyond the forecast horizon. NPV of the entire cash flow stream represents the intrinsic value of the business or project.

NPV in Indian Context — Project Finance and Startup Valuation

In India, NPV is extensively used across sectors. The Reserve Bank of India (RBI) and SEBI require banks and NBFCs to use discounted cash flow methods for credit appraisal of large projects. NITI Aayog mandates NPV analysis for infrastructure projects evaluated under the Viability Gap Funding (VGF) scheme — covering highways, metro rail, power, and renewable energy. Startup founders present NPV and IRR projections to venture capital firms and angel investors during Series A and B fundraising rounds. Real estate developers calculate NPV to decide whether to proceed with township projects or commercial complexes. Manufacturing companies use it to evaluate plant expansion decisions, automation investments, and new product launches.

The choice of discount rate in India typically ranges from 10% for low-risk debt-funded projects to 18–22% for high-risk startup ventures. The WACC for listed Indian companies generally falls between 10% and 15%. For government infrastructure projects, a social discount rate of 12% is commonly used, reflecting the opportunity cost of public capital.

IRR and Its Relationship with NPV

The Internal Rate of Return (IRR) is the discount rate that makes the NPV of a project equal to zero. It represents the project's intrinsic rate of return. If IRR exceeds the required rate of return (hurdle rate), the project is acceptable. The NPV and IRR rules generally lead to the same accept/reject decision for independent projects, but can conflict for mutually exclusive projects — in which case NPV is the more reliable criterion because it measures absolute value creation rather than a rate.

Payback Period and Profitability Index

The payback period measures how quickly the initial investment is recovered. The simple payback period ignores time value; the discounted payback period uses present-value-adjusted cash flows and is more conservative. The Profitability Index (PI = PV of Future Flows / Initial Investment) normalises NPV per rupee invested, making it ideal for ranking projects when capital is scarce. A PI above 1.0 is equivalent to a positive NPV.

NPV Decision Rules

NPV Result	Decision	Interpretation
NPV > 0	Accept	Investment adds value in excess of cost of capital
NPV = 0	Indifferent	Investment earns exactly the required return
NPV < 0	Reject	Investment destroys value; better alternatives exist

Choosing the Right Discount Rate

Investor Type	Typical Discount Rate	Benchmark
Retail / Personal	7–10%	FD rate or Nifty long-term return
SME / MSME	12–15%	Bank lending rate + risk premium
Large Corporate	10–14%	WACC of comparable firms
Infrastructure	10–12%	Social discount rate / VGF norms
Startup / VC	18–25%	VC hurdle rate / expected equity return

Frequently Asked Questions

What is Net Present Value (NPV)?

Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. It is used in capital budgeting and investment planning to analyse the profitability of a projected investment. A positive NPV means the investment adds value; a negative NPV means it destroys value. The formula is NPV = Σ [CF_t / (1+r)^t] − C₀, where CF_t is the cash flow at time t, r is the discount rate, and C₀ is the initial investment.

What is a good NPV?

Any positive NPV is generally considered good because it indicates that the investment will generate more value than the cost of capital. An NPV of zero means the investment exactly meets the required rate of return. The higher the NPV, the better the investment. However, when comparing projects of different sizes, the Profitability Index (PI = NPV / Initial Investment) offers a better comparison per rupee invested.

What is the difference between NPV and IRR?

NPV calculates the absolute rupee value added by a project at a given discount rate, while IRR is the discount rate at which NPV equals zero. If IRR is greater than the required rate of return, the project is acceptable. NPV is generally preferred for mutually exclusive projects because it measures absolute value creation, while IRR can sometimes give misleading results when comparing projects of unequal scale or when cash flows change sign multiple times.

How do I choose the discount rate?

The discount rate should reflect the opportunity cost of capital — that is, the return you could earn on an alternative investment of similar risk. For a business, this is typically the Weighted Average Cost of Capital (WACC). For personal investments, it might be the expected return from a mutual fund or equity index. In India, common benchmarks include the bank fixed deposit rate (6–7%), Nifty 50 long-term returns (~12%), or the WACC of comparable companies (10–15%). Higher-risk projects should use a higher discount rate.

What is the Profitability Index (PI)?

The Profitability Index (PI) is the ratio of the present value of future cash flows to the initial investment. PI = (PV of future cash flows) / Initial Investment, or equivalently PI = 1 + (NPV / Initial Investment). A PI greater than 1.0 indicates a worthwhile investment; a PI less than 1.0 means reject. PI is especially useful when capital is rationed and you need to rank several positive-NPV projects by their efficiency of capital use.

Can NPV be negative and still be acceptable?

In purely financial terms, a negative NPV means the project destroys value and should be rejected. However, there can be strategic or qualitative reasons to accept a negative-NPV project — for example, entering a new market, fulfilling a regulatory requirement, building brand equity, or creating an option for future profitable projects. These non-financial benefits must be explicitly justified and should ideally be quantified and added to the NPV analysis.

What is discounted payback period?

The discounted payback period is the number of years it takes to recover the initial investment using discounted (present value) cash flows rather than nominal cash flows. It improves on the simple payback period by accounting for the time value of money. Because each cash inflow is discounted, the discounted payback period is always longer than the simple payback period. It answers: how many years will it take to recoup our investment in today's rupees?

How is NPV used in Indian project appraisals?

In India, NPV is widely used in project finance by institutions such as SIDBI, NABARD, and commercial banks for evaluating infrastructure, manufacturing, and agri-business projects. The Planning Commission (now NITI Aayog) mandates NPV analysis for major public projects. Infrastructure projects — roads, power plants, ports — are assessed using social NPV incorporating shadow prices. Startups seeking venture capital funding routinely present NPV and IRR projections. The discount rate used often reflects India's cost of capital, which typically ranges from 10% to 18% depending on sector and risk profile.