Net present value discounts every future cash flow back to today using a rate that reflects your cost of capital, then subtracts the upfront investment. Money arriving in year five is worth less than the same amount today, and NPV is the standard way to make that trade-off explicit. This calculator spreads each year's cash flow evenly across its twelve months, the same convention used inside BizCase Builder.
- What is NPV (net present value)?
- Net present value is the sum of an investment's future cash flows discounted back into today's money, minus the upfront cost. It answers a single question: after accounting for the time value of money, does this project add or subtract value? A positive NPV means the discounted benefits exceed what you paid to get them.
- What discount rate should I use?
- Most companies use their weighted average cost of capital, commonly somewhere between 8% and 15%, as the discount rate. If your finance team publishes a hurdle rate, use that instead so your case is comparable to other projects. Riskier or longer projects justify a higher rate because future cash is less certain.
- What does a negative NPV mean?
- A negative NPV means the project's discounted cash flows do not cover the investment at the rate you chose, so capital would earn more elsewhere. It is not automatically a rejection: try a lower discount rate, a longer horizon, or revisit whether all benefits are captured. If the number stays negative under realistic assumptions, the investment destroys value.