Dealith home

IRR and NPV calculator

Enter your cash flows year by year to get the internal rate of return, the net present value and the payback.

%

Cash paid out goes in negative, such as the investment in year 0.

NPV

71,8

At 10,0 %

IRR

12,8 %

Internal rate of return

MOIC

1,40x

Cash in / cash out

Payback

3,2 years

Without discounting

Positive NPV: the project earns more than your 10,0 %.

Cumulative cash flow

  • Cumulative
  • Discounted at 10,0 %
−1.000−5000500Year 0Year 1Year 2Year 3Year 4

NPV at different discount rates

−400−2000200400IRR 12,8 %0 %15 %30 %

Uses yearly cash flows. Year 0 is today and is not discounted.

What are NPV and IRR?

Net present value (NPV) adds up the cash flows of a project after discounting them to today's money. The internal rate of return (IRR) is the discount rate that makes that NPV exactly zero. NPV answers how much value a project creates, and IRR what return it earns.

NPV and IRR formula

NPV = CF₀ + CF₁ / (1 + r) + CF₂ / (1 + r)² + … + CFₙ / (1 + r)ⁿ

IRR = the rate r for which NPV = 0

CF is the cash flow of each year and r the discount rate. IRR has no direct formula, so calculators find it by trial and error.

How to calculate NPV and IRR: an example

You invest 1.000 today and receive 200, 300, 400 and 500 over the next four years. At a 10 % discount rate those inflows are worth 1.071,8 today, so the NPV is +71,8. The IRR is 12,8 %, higher than the 10 % you require, so the project clears the hurdle.

How to calculate NPV and IRR in Excel

With today's flow in B1 and the following years in B2:B5:

=B1+NPV(10%,B2:B5)

=IRR(B1:B5)

A common mistake is to put today's flow inside the NPV function: Excel would discount it by one year.

What is a good NPV or IRR?

A positive NPV means the project earns more than your discount rate. An IRR above that same rate says the same thing. The discount rate should reflect the risk of the project, so a good IRR for a safe asset can be a poor one for a risky venture.

When IRR can mislead

If the cash flows change sign more than once, a project can have several IRRs, and this page lists them. IRR also ignores the size of a project: a small project can have a higher IRR and still create less value. When two projects compete, prefer the higher NPV.