Determine the value of a series of future cash flows today, minus the initial investment, to evaluate project profitability.
Project Parameters
Investment Analysis
Net Present Value$48,033Profitable Project
Cash Flow Timeline (Nominal Dollars)
About this calculator
Overview
Determine the value of a series of future cash flows today, minus the initial investment, to evaluate project profitability.
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Pro Tips
What is NPV?: NPV is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. A positive NPV indicates that the projected earnings exceed the anticipated costs, both in today's dollars.
Should I accept a project with a positive NPV?: Generally, yes. A positive NPV means the project is expected to add value to the firm and earn a higher return than the discount rate.
What discount rate should I use?: Ideally, you should use your company's Weighted Average Cost of Capital (WACC), which represents the minimum return required by investors.
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Fun Facts
"The concept of 'Time Value of Money' is the foundation of NPV鈥攁 dollar today is worth more than a dollar tomorrow."
"NPV is generally considered superior to the 'Payback Period' because it accounts for the risk and the timing of all future cash flows."
"If you set the NPV to zero and solve for the discount rate, you get the 'Internal Rate of Return' (IRR)."
