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Net Present Value

Values a project by discounting future cash flows to today.

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Interactive inputs coming โ€” use the formula and example below.

Worked example

A positive NPV suggests the project adds value.

How it works

1Enter your figures
2We apply the formula
3See your result

How to use it

  • Use the formula below with your own figures.

The formula

NPV = ฮฃ cash flow รท (1+r)โฟ โˆ’ investment.

Worked example

A positive NPV suggests the project adds value.

Frequently asked questions

What rate to use?

Your cost of capital or required return.

Positive NPV?

Generally worth pursuing.

Tips

  • Know your break-even before scaling spend.
  • Separate margin from markup when pricing.
  • Discount future cash flows to value projects.

Key terms

Break-even
Where revenue covers costs.
Margin
Profit as a percent of price.
NPV
Discounted value of future cash flows.