About the NPV & IRR Calculator
This NPV and IRR calculator evaluates any investment where you spend money up front and get it back over several years – new equipment, a rental property, a small business or a corporate project. NPV converts every future cash flow into today's money using your discount rate and adds them up; IRR is the discount rate at which NPV is exactly zero.
The year-by-year table shows discount factors, present values and cumulative cash flows, so you can check every step or copy it into a report. If the cash flows change sign more than once, the calculator finds every IRR and warns you.
How to use
- Enter the initial investment (money spent in year 0) as a positive number and the discount rate in percent.
- Enter the net cash flow for each year from year 1. Use negative numbers for years with extra investment or losses, and + Add year for longer projects.
- Already have the numbers in a spreadsheet? Open Paste several values at once and paste the column. A negative first value becomes the initial investment.
- NPV, IRR, MIRR, profitability index and payback periods update instantly; the table below shows each year's present value and running totals.
Formulas and decision rules
| Metric | Formula | Accept if |
|---|---|---|
| NPV | −I + Σ CFt ÷ (1+r)t | NPV > 0 |
| IRR | r such that NPV = 0 | IRR > discount rate |
| MIRR | (FV of positive flows at r ÷ PV of negative flows at r)1/n − 1 | MIRR > discount rate |
| Profitability index | PV of future cash flows ÷ I = 1 + NPV ÷ I | PI > 1 |
| Payback period | Time until cumulative cash flow reaches 0 | Shorter = less risk |
Example: an investment of $10,000 returning $3,000, $4,000, $5,000 and $2,000 over four years at a 10% discount rate has an NPV of $1,155.66, an IRR of 15.32%, a MIRR of 13.05%, a PI of 1.12, a payback period of 2.6 years (2 + 3,000 ÷ 5,000) and a discounted payback of about 3.15 years.
When NPV and IRR disagree
- Projects of different size: IRR is a percentage, so a small project can look better than a large one that creates more value. For mutually exclusive projects, pick the higher NPV.
- Multiple IRRs: a large negative cash flow late in the project (a refit, clean-up or decommissioning cost) can create two IRRs or none. Use NPV or MIRR in that case.
- Reinvestment assumption: IRR implicitly assumes interim cash flows are reinvested at the IRR itself. MIRR assumes reinvestment at the discount rate and is therefore more conservative.
Matching Excel and Google Sheets
The spreadsheet function NPV(rate, value1, …) discounts the first value by one full year. To get the same NPV as this calculator, use =NPV(10%, B2:B5) - initial_investment. =IRR(B1:B5) (with −initial investment in B1) and =MIRR(B1:B5, 10%, 10%) match the IRR and MIRR shown here.
FAQ
What discount rate should I use?
Companies usually use their weighted average cost of capital (WACC) or a hurdle rate. Individuals can use the return they could earn on an alternative investment of similar risk. If unsure, try several rates and compare them with the IRR – the rate at which NPV becomes zero.
Does a negative NPV mean I lose money?
Not necessarily in nominal terms – it means the project earns less than your discount rate. You would be better off investing the same money at that rate, so a negative-NPV project is normally rejected.
Why does the calculator show no IRR?
If all cash flows have the same sign, or the NPV curve never crosses zero, there is no IRR. The calculator searches every rate between −99% and 1,000%, so any IRR in that range is found.
Can I use monthly cash flows?
Yes. Treat each row as a month and enter a monthly discount rate (for 12% a year, about 0.949% a month). IRR and payback are then in months, too.
How is a fractional payback period calculated?
Cash is assumed to arrive evenly during the year in which the cumulative total turns positive. If the cumulative balance is −$3,000 after year 2 and year 3 brings $5,000, payback is 2 + 3,000 ÷ 5,000 = 2.6 years.