NPV and IRR Calculator
This NPV and IRR calculator values an investment from its initial cost and up to five years of cash flows. Enter the cash flows and a discount rate, and the NPV IRR calculator returns the net present value, the internal rate of return, and the profitability index, so you can calculate IRR and NPV together in one step.
Results
The NPV and IRR Calculator is part of our Investment collection. Browse more investment to size, convert, and check your work alongside this tool.
What the NPV IRR calculator shows
Net present value (NPV) converts every future cash flow into today's money at your discount rate and adds them up; a positive NPV means the investment adds value. The internal rate of return (IRR) is the rate at which NPV is exactly zero. The NPV IRR calculator gives both, plus the profitability index, the present value of inflows per dollar invested.
How to calculate IRR and NPV
There is no closed formula for IRR with three or more cash flows, so the calculator searches for the rate where NPV crosses zero. The profitability index is the present value of the inflows divided by the investment.
NPV IRR calculator example
An investment of $10,000 returns $3,000, $4,000, and $5,000 over three years. At a 10 percent discount rate:
The IRR of 8.90 percent is below the 10 percent hurdle, which is why the NPV is negative.
How to use the NPV IRR calculator
Enter the initial investment, the cash flow for each of up to five years (leave unused years at 0), and the discount rate you require. The NPV IRR calculator returns the NPV, the IRR, and the profitability index. Use your cost of capital or target return as the discount rate.
Reading the NPV calculator with IRR results
Accept a project when NPV is positive, which is the same as IRR being above your discount rate and the profitability index being above 1. When comparing projects of different sizes, prefer the higher NPV, because IRR does not reflect scale. Cash flows that change sign more than once can produce more than one IRR.
When to use the NPV IRR calculator
- Screening a capital project with the NPV IRR calculator
- Comparing two investments at your cost of capital
- Checking a business case before approval
- Finance coursework on discounted cash flow
Common NPV IRR calculator mistakes
- Entering the investment as a positive inflow. It is the cost.
- Using a monthly rate with yearly cash flows.
- Ranking projects by IRR alone. Compare NPV too.
Tips for accurate results
- Match the discount rate to the project risk.
- Use realistic cash flow forecasts.
- Test a higher and lower rate to see sensitivity.
IRR calculator with NPV: why use both
An IRR calculator with NPV gives two views of the same cash flows. NPV says how much value the project adds in today's money; IRR says what return it earns. They agree on accept or reject for a single project, but can rank two projects differently: a small project may have a higher IRR yet add less value than a large one. When the choice is between projects, rank by NPV. For the simple total gain on an investment without discounting, the ROI calculator is the quicker check.
Financial calculator NPV IRR steps by hand
To calculate IRR and NPV without software, compute NPV at two rates, one giving a positive value and one negative, then interpolate between them. Here NPV is +$176.29 at 8 percent and −$210.37 at 10 percent, which points to an IRR of about 8.91 percent; the exact value is 8.90 percent.
NPV IRR calculator reference (same cash flows)
| Discount rate | NPV | Decision |
|---|---|---|
| 6% | $588.27 | Accept |
| 8% | $176.29 | Accept |
| 8.90% (IRR) | $0.00 | Break-even |
| 10% | −$210.37 | Reject |
NPV and IRR Calculator FAQ
What is the difference between NPV and IRR?
NPV is a money amount at your discount rate; IRR is the rate that makes NPV zero.
When is a project worth doing?
When NPV is positive, which means IRR exceeds your required return.
Why can IRR mislead?
It ignores project size and can have several values when cash flows change sign more than once.
What discount rate should I use?
Your cost of capital or the minimum return you require for that level of risk.