NPV, IRR and Payback Calculator: Net Present Value, Internal Rate of Return and Payback Period

Is the project worth doing? NPV, IRR and payback.

Calculated from standard textbook formulas, with every step shown. The formulas are fixed, so the working does not need checking: what matters is the numbers you type in. Use these calculators only if you are competent to choose the inputs (loads, material strength, dimensions, supports) and check your units and assumptions. For learning and checking your own working: design and sign-off are for a qualified engineer. Drafting Central does not store the numbers you type.

How this calculator works

Enter the initial cost and the discount rate.

Enter the net cash flow for each year.

The calculator gives the NPV, the IRR, the paybacks and the profitability index.

Formulas used

  • NPV = -C_0 + \sum_{t=1}^{n}\frac{CF_t}{(1 + r)^t}
  • NPV(IRR) = 0
  • PI = \frac{PV}{C_0}

Worked example

With the default numbers in the calculator above:

  1. Net present value (NPV): 39356.62 dollars
  2. Internal rate of return (IRR): 21.675 % per year
  3. Simple payback period: 2.875 years
  4. Discounted payback period: 3.356 years
  5. Profitability index (benefit-cost ratio): 1.3936
  6. Present value of the cash flows: 139356.62 dollars

Change the numbers in the calculator to see the full working, every step, for your own case.

A second worked example

A different case, with these numbers: Discount rate per year 30 %.

  1. Net present value (NPV): -15921.39 dollars
  2. Internal rate of return (IRR): 21.675 % per year
  3. Simple payback period: 2.875 years
  4. Discounted payback period: The cost is not paid back within the years given, after discounting
  5. Profitability index (benefit-cost ratio): 0.84079
  6. Present value of the cash flows: 84078.61 dollars

Common questions

What is net present value?

The value today of the future cash flows of a project, less its cost. A positive NPV means the project earns more than the discount rate.

What is the IRR?

The discount rate at which the NPV is exactly zero. If the IRR is above your required rate, the project is worth doing.

What is the difference between payback and discounted payback?

Simple payback ignores the time value of money. Discounted payback counts each year at its present value.

Related calculators

Got a question about this? Ask an engineering question and get a plain-language answer with references.

Further reading: Any engineering economics text (net present value, IRR and payback).

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