Cash Flow, NPV, IRR and Payback

Entering cash flows

Enter the initial investment as a positive amount paid today. Each subsequent line is the net cash flow at the end of one year. Receipts are positive and costs negative. Enter zero for a year with no cash flow. Blank lines within the list are rejected to preserve the year sequence.

Present value and internal return

Each cash flow is divided by (1+i)^t and the initial investment is subtracted from the total. Internal rate of return is the annual rate that makes this value zero. If the cash flow signs change more than once after zeros are omitted, several roots may exist and no IRR is reported.

Payback

An initial investment of 100 followed by 60 in each of two years has simple payback of 1 + 40/60 = 1.667 years. This fractional result is linear interpolation within a year. If receipts arrive only at year end, actual recovery occurs at the end of year two. Later costs can make the cumulative balance negative again.

Limits

Enter up to 100 years. Use matching nominal or real assumptions for both cash flows and discount rate. The default rate is an example. IRR is searched over ln(1+r) from minus 20 to 20. No result is reported outside that range.

Frequently asked questions

How do you calculate net present value?

For example, with an initial investment of 100 currency units, year end cash flows of 60 and 60 and an annual discount rate of 0.1 (ten percent), discounting the flows and subtracting the investment gives a net present value of 4.132 currency units. This preliminary calculation uses equal annual periods, requires consistent tax, inflation and risk assumptions, and does not constitute an investment decision.

Calculate with these values