Compute Internal Rate of Return, Net Present Value, payback period, and decision verdict on any project cashflow stream — USD, INR, AED.
A capital-budgeting calculator for evaluating investment projects. Enter the initial outlay and yearly cashflows, set your discount rate (cost of capital) and hurdle rate, and instantly see NPV at the chosen rate, IRR via bisection, nominal & discounted payback, profitability index, and an Accept/Reject verdict. Includes an NPV-vs-discount-rate curve with the IRR marked, a sensitivity table at 5/8/10/12/15/20%, a per-year breakdown of discounted and cumulative cashflows.
Net Present Value discounts every future cashflow back to today using the formula NPV = Σ CF_t / (1 + r)^t, where r is the discount rate and t is the year. The Year 0 outflow is included as a negative number, so NPV is the sum of all discounted cashflows including the initial investment. The Internal Rate of Return is the value of r that makes NPV exactly zero. There is no closed-form solution, so this calculator uses bisection: it brackets the IRR, evaluates NPV at the midpoint, and narrows the bracket on each iteration until NPV is within a tiny tolerance of zero.
The textbook rule for capital budgeting is simple: accept any project where NPV is greater than zero at your cost of capital. A positive NPV means the project earns more than the return required by investors, and accepting it increases firm value by exactly the NPV amount. The IRR rule says: accept if IRR is greater than the hurdle rate. For independent projects with conventional cashflows this gives the same answer as NPV. For mutually exclusive projects, ranking by IRR can choose the wrong project — always fall back to NPV when comparing alternatives.
A single-point NPV can hide significant risk. The sensitivity table on this page shows NPV at six different discount rates from 5% to 20% — if NPV stays positive across all of them, the decision is robust to estimation error in your cost of capital. If NPV flips negative within a few percentage points of your base rate, the project is fragile and deserves more scrutiny on assumptions.
NPV (Net Present Value) tells you the dollar value a project adds in today's money at a chosen discount rate — a positive NPV means the project beats your cost of capital. IRR (Internal Rate of Return) is the discount rate that makes NPV equal to zero — it tells you the project's effective annualized return. NPV measures size of value created; IRR measures rate of return.
Use NPV when comparing mutually exclusive projects of different sizes — IRR can mislead you because a small project with a huge IRR may add less absolute value than a larger project with a moderate IRR. Use IRR when capital is constrained and you want to rank projects by return per dollar invested. The safest rule: accept any project with NPV greater than zero at your cost of capital.
When cashflows change sign more than once (for example: outflow, inflow, outflow), the NPV equation can have multiple solutions and the project may have several mathematical IRRs. In that case IRR loses meaning as a decision rule and you should rely on NPV instead, or use Modified IRR (MIRR).
The hurdle rate is the minimum return a project must earn to be acceptable. Most companies set it equal to their weighted average cost of capital (WACC) plus a risk premium for the specific project — riskier projects get higher hurdles. For personal investing, use the return on a comparable-risk alternative (such as an index fund).
Payback period is the time it takes for cumulative nominal cashflows to recover the initial investment — it ignores the time value of money. Discounted payback applies the discount rate to each cashflow first, then asks the same question. Discounted payback is always longer (or equal) and is the more rigorous of the two.
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