Calculating your net present value is straightforward once you know the NPV formula and what each input means. This guide explains the method in plain language, walks through a manual calculation, and gives worked examples you can follow — then you can do it instantly with the NPV Calculator.
What is NPV?
The NPV calculation tells you your net present value from a few simple inputs. The figure you are solving for here is the net present value, expressed in INR.
The NPV formula
The core formula is:
Net present value = Future cash inflow ÷ (1 + Discount rate ÷ 100)^(Years until inflow) - Initial investmentHere is what each input means:
- Initial investment — a money amount. Example: ₹10,00,000.
- Future cash inflow — a money amount. Example: ₹20,00,000.
- Discount rate — a percentage, such as an annual rate. Example: 1%.
- Years until inflow — a number. Example: 5.
How to calculate it step by step
- Write down the initial investment (for example, ₹10,00,000).
- Write down the future cash inflow (for example, ₹20,00,000).
- Write down the discount rate (for example, 1%).
- Write down the years until inflow (for example, 5).
- Apply the formula above to get your net present value.
- Double-check the result with the NPV Calculator.
Worked examples
Example 1
| Input / Output | Value |
|---|---|
| Initial investment | ₹10,00,000 |
| Future cash inflow | ₹20,00,000 |
| Discount rate | 1% |
| Years until inflow | 5 |
| Net present value | ₹2,41,843 |
| Present value of inflow | ₹12,41,843 |
With initial investment of ₹10,00,000, future cash inflow of ₹20,00,000, discount rate of 1% and years until inflow of 5, the net present value works out to ₹2,41,843.
Example 2
With initial investment of ₹20,00,000, future cash inflow of ₹20,00,000, discount rate of 1% and years until inflow of 5, the net present value works out to -₹7,58,157.
| Result | Value |
|---|---|
| Net present value | -₹7,58,157 |
| Present value of inflow | ₹12,41,843 |
Example 3
With initial investment of ₹5,00,000, future cash inflow of ₹20,00,000, discount rate of 1% and years until inflow of 5, the net present value works out to ₹7,41,843.
| Result | Value |
|---|---|
| Net present value | ₹7,41,843 |
| Present value of inflow | ₹12,41,843 |
Tips for an accurate result
- Keep your units consistent — mixing, say, months with years or grams with kilograms is the most common source of error.
- Round only at the very end. Rounding inputs early can shift the final answer noticeably.
- Re-run the numbers whenever an input changes, rather than estimating from an old result.
- Annual rates must be converted to the period you are calculating for (for example, divide an annual rate by 12 for a monthly figure).
Prefer not to do the maths by hand? — the NPV Calculator does it instantly, for free, with the formula and a worked example built in.
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