NPV & IRR Calculator - Net Present Value & Internal Rate of Return

How to use this tool

1. Enter a discount rate. Type your required rate of return or cost of capital as a percentage (e.g., 10 for 10%).
2. Add cash flow rows. Enter period 0 (the initial investment, usually negative) and subsequent period cash flows. Use negative values for outflows and positive values for inflows.
3. Review NPV and IRR. The calculator shows the NPV at your discount rate, the IRR, and the payback period. A positive NPV and IRR above your hurdle rate both indicate an attractive investment.
4. Check the sensitivity table. The sensitivity table shows how NPV changes at discount rates ±2.5% and ±5% from your input rate, helping you understand how sensitive the result is to your assumptions.

Understanding NPV and IRR

Net Present Value (NPV) and Internal Rate of Return (IRR) are the two most important metrics in capital budgeting. NPV tells you the absolute dollar value an investment creates above your cost of capital. A positive NPV means the investment is worth pursuing. IRR tells you the percentage return the investment generates. Compare it to your hurdle rate to decide.

How NPV is calculated

NPV sums all future cash flows discounted to today's dollars using the formula: NPV = Σ CF_t / (1 + r)^t. The discount rate r reflects the opportunity cost of capital (what you could earn in an alternative investment of similar risk). The higher the discount rate, the less future cash flows are worth today.

The multiple IRR problem

When a project has unconventional cash flows (outflows in the middle of the project or multiple phases), the NPV equation can have more than one solution, meaning there are multiple valid IRRs. This calculator detects that situation and warns you. In such cases, rely on NPV rather than IRR for your decision.

MIRR - Modified Internal Rate of Return

MIRR solves the multiple-IRR problem by making explicit assumptions about reinvestment rates. Traditional IRR implicitly assumes positive cash flows are reinvested at the IRR itself - an often unrealistic assumption. MIRR instead assumes positive cash flows are reinvested at the cost of capital (or a specified reinvestment rate), producing a single, unambiguous result.

The formula: MIRR = (FV of positive flows / PV of negative flows)^(1/n) − 1

Where FV is computed at the reinvestment rate and PV at the finance rate.

Worked example

NPV at 10% = −$100,000 + $36,364 + $41,322 + $45,079 = +$22,765 (positive -> accept the investment).

IRR ≈ 23.4% (the discount rate at which NPV = 0). Since 23.4% > 10% hurdle rate -> accept.

Discount rate selection guide

The discount rate represents the opportunity cost of capital - what you could earn on an alternative investment of similar risk. Common choices:

• WACC (Weighted Average Cost of Capital): used for corporate capital budgeting. Reflects the blended cost of debt and equity financing.
• Risk-free rate + risk premium: for personal or project-level investments. Start with the current 10-year Treasury yield and add a premium for the specific risks of the project.
• Next-best alternative rate: if the alternative is a 7% index fund, use 7% as the minimum acceptable return. Any NPV-positive project at that rate beats leaving the money invested.