Put a number on whether an investment is worth it. Enter the upfront cost, your required return, and the cash flows you expect — get net present value, internal rate of return, payback period, and a cumulative cash-flow chart.
Net cash in (or out, as a negative) for each future period.
Cumulative cash flow. It crosses zero at the payback point.
NPV is the headline number
A positive NPV means the project is expected to earn more than your required return — it creates value. Between two options, the higher NPV usually wins, because NPV is measured in actual money, not a percentage.
IRR is the intuitive one
IRR is the return the cash flows imply. Compare it to your discount rate: above it, the project clears the bar. Just be wary of IRR with unconventional cash flows (multiple sign changes), where more than one IRR can exist.
Payback is the gut check
Payback tells you how long your money is at risk. It ignores everything after recovery and (in the simple version) the time value of money — useful as a liquidity screen, not as the sole decision rule.
NPV is the sum of every cash flow discounted to today at your chosen rate, with the initial investment counted as a negative flow at time zero. Positive NPV means the project beats your required return and creates value; negative NPV means it falls short.
IRR is the discount rate that makes NPV exactly zero — the annualized return the cash flows imply. If IRR is above your discount rate, the project clears your bar. Because it can't be solved with a simple formula, this tool finds it numerically.
Simple payback is how long until cumulative cash recovers the initial cost, ignoring the time value of money. Discounted payback discounts each inflow first, so it's always at least as long — the more conservative figure.
Use the return you'd require for this risk — your cost of capital, a hurdle rate, or the next-best alternative's return. A higher rate penalizes distant cash flows and lowers NPV. There's no single right number; it reflects your risk and opportunity cost.
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