What is the NPV formula?

NPV = Σ CFt ÷ (1 + r)t for t = 0 to n, where CFt is the net cash flow in period t (CF0 is usually the negative initial investment) and r is the discount rate.

How do I interpret NPV?

NPV above zero: the project earns more than the required return and adds value. Below zero: it earns less. Zero: it earns exactly the required return.

Why is my Excel NPV different?

Excel's NPV discounts the first value by one period. Leave the time-0 investment out of the function and add it separately.

What discount rate should I use?

The required return for projects of that risk, often the company's WACC for average-risk projects.

Net Present Value (NPV) Formula

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Net Present Value (NPV) Calculator

Net present value is the standard test for whether an investment creates value. It discounts every cash flow of a project back to today at the required rate of return and adds them up, with the initial investment entered as a negative cash flow at time 0. A positive NPV means the project returns more than the required rate; a negative NPV means it returns less.

Formula

NPV = Σ_t=0ⁿ CF_t(1 + r)^t = CF₀ + CF₁(1 + r) + CF₂(1 + r)² + …

Where

CF_t: net cash flow in period t (CF₀ is usually the negative initial investment)
r: discount rate (required return) per period
t: period number, starting at 0 for today

Calculator

Cash flows, starting with time 0

Enter the initial investment as a negative number, then one cash flow per period.

Discount rate per period (r) (%)

Result and step-by-step solution

Net present value

8,564.99

NPV is positive: at a 10% required return the project adds value and would normally be accepted.

Discount every cash flow

t	Cash flow	Discount factor 1/(1+r)^t	Present value	Cumulative
0	−50,000.00	1	−50,000.00	−50,000.00
1	15,000.00	0.909091	13,636.36	−36,363.64
2	18,000.00	0.826446	14,876.03	−21,487.60
3	20,000.00	0.751315	15,026.30	−6,461.31
4	22,000.00	0.683013	15,026.30	8,564.99

Add the present values
NPV = −50,000.00 + 13,636.36 + 14,876.03 + 15,026.30 + 15,026.30 = 8,564.99
Read the result
PV of the cash flows after time 0 = 58,564.99 versus time-0 flow −50,000.00.

How to use the formula

Enter the cash flows in order, starting with time 0. The table shows each flow, its discount factor 1 ÷ (1 + r)^t, its present value and the running total, so you can see how much of the value comes from the later years. Negative flows in later years (a refit, a clean-up cost) are handled the same way.

In the example, an investment of 50,000 returns 15,000, 18,000, 20,000 and 22,000 over four years. At a 10% required return the present value of the inflows is 58,564.99, so the NPV is 8,564.99 and the project should be accepted. Note that spreadsheet NPV functions assume the first value is one period away; with Excel you would write =NPV(10%, flows 1 to 4) − 50,000. The rate that makes NPV zero is the IRR.

Frequently asked questions

What is the NPV formula?: NPV = Σ CF_t ÷ (1 + r)^t for t = 0 to n, where CF_t is the net cash flow in period t (CF₀ is usually the negative initial investment) and r is the discount rate.
How do I interpret NPV?: NPV above zero: the project earns more than the required return and adds value. Below zero: it earns less. Zero: it earns exactly the required return.
Why is my Excel NPV different?: Excel’s NPV discounts the first value by one period. Leave the time-0 investment out of the function and add it separately.
What discount rate should I use?: The required return for projects of that risk, often the company’s WACC for average-risk projects.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.