This net present value calculator estimates the NPV of an investment by the discounted sum of all cash flows while considering the initial cost, discount rate and ins and outs.  There is in depth information about this indicator and its equation below the application.


Discount rate: *
%
Initial cost: *
$
Investment term: *
Y
Year 1 cash flow: *
$
Year 2 cash flow:
$
Year 3 cash flow:
$
Year 4 cash flow:
$
Year 5 cash flow:
$

How does this net present value calculator work?

This tool can help when analyzing whether an investment is profitable or not by assessing its Net Present Value which is a critical financial profitability indicator every investor looks at before any move.

The algorithm behind this net present value calculator uses the NPV formula which is explained here in both short and long form:

    • NPV equation long form:

How Much Do I...

    • NPV formula short form:

How Much Do I...

Where:

C0 is the initial investment.

C1 … Ct are the projected cash flows within the term specified. They can either positive (ins) cash flows or negative (outs) cash flows.

r is the discount rate expressed as a percentage.

t is the term specified.

Apart from the NPV value the financial calculator estimates as well the present value of the assumed cash flows which is determined by adding the NPV value to the initial cost of the investment.

Please note that the tool allows adding as many cash flows as needed by simply clicking the "ADD 1 YESR CASH F" button.

How to calculate net present value?

Let's assume a business with the following financial scenario:

Discount rate    5%  

Project term      5  years

Year

Cash Flow

Present Value

Cumulative

Initial cost

-$10,000.00

-$10,000.00

-$10,000.00

1

2000

1904.761905

-$8,095.24

2

1500

1360.544218

-$6,734.69

3

2500

2159.593996

-$4,575.10

4

3000

2468.107424

-$2,106.99

5

3500

2742.341583

$635.35

NPV

$635.35

PV of cash flow

$10,635.35

Why is NPV so important?

For investor all around the world this is a synthetic indicator that:

  • … is easy to talk about and simulate through a what if scenario;
  • … allows anybody compare between two or more opportunities, investment plans or projects;
  • … together with an analysis of the risk profile of the investment can help the investor decide whether to finance the business or not.

24 Mar, 2015 | 0 comments

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