Comprehensive Guide
Learn more in our Business & Tax Guide.
How it works
npv / irr calculator takes your inputs and produces net present value, internal rate of return, discount rate. Net present value and internal rate of return for a project's cash flows — the two numbers that decide whether to build or pass. You provide 2 inputs: Initial investment (currency, in dollars) (default: 100000 dollars); Discount rate (percent, in percent) (default: 10 percent). The calculator returns 3 outputs: Net present value (the primary result); Internal rate of return (a secondary output); Discount rate (a supplementary figure). Business tax and finance calculations combine multiple moving parts — revenue, expenses, depreciation, tax brackets, and timing — in ways that make back-of-envelope estimates unreliable. This calculator handles the interaction of those variables precisely, so your business decisions rest on real arithmetic. The underlying formula: NPV = -Initial + Σ CF(t)/(1+r)^t | IRR = the r where NPV = 0 With the default values, net present value is computed from the interaction of every input field — change any one of them and the result updates immediately, so you can stress-test different scenarios without re-entering the whole form. Adjust the inputs to match your real financial situation. The defaults are realistic starting points, but every person's circumstances differ — your actual income, expenses, rates, and timelines will produce a different answer. Use the tool iteratively: start with the defaults, then change one variable at a time to see which factor has the largest impact on your outcome.Formula
NPV = -Initial + Σ CF(t)/(1+r)^t | IRR = the r where NPV = 0
Tips
- Use cash flows, not accounting profit — depreciation is not cash leaving the business.
- A project with IRR above your cost of capital is a candidate; NPV positive makes it a decision.
- Run the sensitivity: NPV at your rate, and the rate where NPV turns negative.
- For mutually exclusive projects, choose by NPV — the bigger absolute value wins, not the higher percentage.
Frequently asked questions
What is NPV?
Net present value: every future cash flow discounted back to today at your cost of capital, minus the initial investment. It measures in today's dollars whether a project creates value — positive is the green light, negative the stop sign.
What is IRR?
The internal rate of return is the discount rate that makes NPV exactly zero — the project's own rate of return. Compare it to your hurdle rate (usually your cost of capital): above it, the project clears the bar; below it, capital is better deployed elsewhere.
Which is better, NPV or IRR?
For a single project, they agree. Comparing projects, NPV is the better arbiter because IRR ignores scale and can produce multiple or no solutions with unconventional cash flows. Report both, decide with NPV.
What discount rate should I use?
Your weighted average cost of capital — roughly 8-12% for most small businesses — or a higher hurdle for riskier projects. The rate is the risk statement: a 15% discount on a volatile venture is honest; 10% on the same venture flatters it.