# Net Present Value Calculator

Instructions: Use this Net Present Value Calculator to compute the net present value ($$NPV$$) of a stream of cash flows by indicating the yearly cash flows ($$F_t$$), starting at year $$t = 0$$, and the discount rate ($$r$$) (Type in the cash flows for each year from $$t=0$$ to $$t = n$$. Type '0' if there is no cash flow for a year):

Interest Rate $$(r)$$ =
Type the yearly cash flows (comma or space separated)

## More about this Net Present Value Calculator (NPV) with steps

The net present value ($$NPV$$) of a stream of cash flows $$F_t$$ depends on the discount interest rate $$r$$, and the cash flows themselves. It corresponds to the sum of the present values of ALL cash flows associated to a project.

### How do you calculate net present value? What formula do you use?

The net present value ($$NPV$$) can be computed using the following formula:

$NPV = \displaystyle \sum_{t=0}^n \frac{F_t}{(1+i)^t}$

where $$F_t$$ corresponds to the total sum of cash flows for period $$t$$. Such sum can be negative or positive. The factor $$(1+i)^t$$ in the denominator is part of the discount factor used to bring the value of future cash flows into present values.

### What is NPV discount rate?

The discount rate corresponds to $$i$$ in the above equation, and represents the interest rate, or more precisely, the cost of capital, which is used to bring future values into present values.

### How to compute the net present value excel

Excel has a built in function, the =NPV() function that allows you to compute the present value of cash flows.

### What other calculators can I use to evaluate a project?

There are other metrics used to evaluate a projects, which use different angles to assess profitability. You can also use our internal rate of return calculator , the payback period calculator , or our profitability index calculator .

### How to calculate Present Value step by step? Here is an example

Question: You are the manager of a new project that requires $10,000 of upfront outlay. It is expected that the project will bring a revenue of$3,000 at the end of the first year, and \$4,000 at the end of the following 3 years. Assuming that the discount rate is 4%, compute the net present value (NPV) of the project.

Solution:

This is the information we have been provided with:

• The cash flows provided are: -10000,3000,4000,4000,4000 and the discount rate is $$r = 0.04$$.

Therefore, the net present value (NPV) associated to these cash flows are computed using the following formula

$NPV = \displaystyle \sum_{i=0}^n {\frac{F_i}{(1+i)^i}}$

The following table shows the cash flows and discounted cash flows:

 Period Cash Flows Discounted Cash Flows 0 -10000 $$\displaystyle \frac{ -10000}{ (1+0.04)^{ 0}} = -\text{\textdollar}10000$$ 1 3000 $$\displaystyle \frac{ 3000}{ (1+0.04)^{ 1}} = \text{\textdollar}2884.62$$ 2 4000 $$\displaystyle \frac{ 4000}{ (1+0.04)^{ 2}} = \text{\textdollar}3698.22$$ 3 4000 $$\displaystyle \frac{ 4000}{ (1+0.04)^{ 3}} = \text{\textdollar}3555.99$$ 4 4000 $$\displaystyle \frac{ 4000}{ (1+0.04)^{ 4}} = \text{\textdollar}3419.22$$ $$Sum = 3558.04$$

Based on the cash flows provided the NPV is computed as follows:

$\begin{array}{ccl} NPV & = & \displaystyle \frac{ -10000}{ (1+0.04)^{ 0}}+\frac{ 3000}{ (1+0.04)^{ 1}}+\frac{ 4000}{ (1+0.04)^{ 2}}+ \frac{ 4000}{ (1+0.04)^{ 3}}+\frac{ 4000}{ (1+0.04)^{ 4}} \\\\ \\\\ & = & -\text{\textdollar}10000+\text{\textdollar}2884.62 +\text{\textdollar}3698.22+\text{\textdollar}3555.99+\text{\textdollar}3419.22 \\\\ \\\\ & = & \text{\textdollar}3558.04 \end{array}$

Therefore, the net present value associated to the provided cash flows and the discount rate of $$r = 0.04$$ is $$NPV =\text{\textdollar}3558.04$$.