NPV / IRR Calculator
Net present value and internal rate of return from a cash-flow stream.
Overview
The NPV / IRR Calculator takes a list of cash flows and a discount rate and returns the net present value, plus solves for the internal rate of return that drives NPV to zero. Enter your initial outlay as a negative number and the expected returns each period as positives, and read off both metrics.
It is built for finance students learning capital budgeting, founders evaluating investment decisions, real-estate investors comparing properties and engineers running cost-benefit analyses. NPV says "is this worth doing at my chosen hurdle rate?"; IRR says "what return does this project actually deliver?"
How it works
For cash flows C_0, C_1, ..., C_n at periods 0 through n and discount rate r, NPV is Σ C_t / (1 + r)^t. The initial cash flow C_0 is usually negative (the investment) and later flows are positive (the returns).
IRR is the rate that makes NPV equal to zero: solve NPV(r) = 0 for r. There's no closed form, so the calculator uses Newton's method or bisection. With mixed signs in the cash flows, multiple IRRs can exist; the tool reports the lowest non-negative root that converges.
Examples
Cash flows: -1000, 300, 400, 500, 600 at r=10%
→ NPV ≈ 391.42, IRR ≈ 24.89%
Cash flows: -10000, 3000, 4200, 6800 at r=8%
→ NPV ≈ 1545.99, IRR ≈ 16.59%
Cash flows: -500, 100, 100, 100, 100, 100 at r=5%
→ NPV ≈ -67.17 (negative — reject at 5% hurdle)
FAQ
Should I use NPV or IRR?
NPV is the more decision-useful metric — it tells you the dollar value created. IRR is useful as a relative ranking but can mislead when scale or sign patterns differ between projects.
What if my cash flows are negative more than once?
Multiple IRRs can exist for projects with sign changes during the life. NPV at a chosen rate is then the safer guide.
Is IRR always realistic?
IRR assumes intermediate cash flows are reinvested at the IRR itself, which is usually optimistic. Modified IRR (MIRR) uses a separate reinvestment rate.
How is the discount rate chosen?
It typically reflects the cost of capital or a required hurdle rate. Higher uncertainty calls for a higher discount rate.
Are periods always one year?
The calculator treats each step as one period. If you have monthly cash flows, supply a monthly rate (annual / 12).