What is the difference between NPV and IRR?

NPV expresses a project's value in dollar terms — the sum of all discounted future cash flows minus the initial investment — while IRR expresses it as a percentage: the discount rate at which NPV equals zero. For most single, non-mutually-exclusive projects, both metrics agree on the accept/reject decision.

What discount rate should I use for NPV?

Most businesses use their Weighted Average Cost of Capital (WACC) as the discount rate, since it represents the minimum return needed to satisfy both debt and equity investors. A common shortcut for small businesses is to use a target hurdle rate, often 8%–15% depending on project risk.

What if NPV and IRR give conflicting recommendations?

This happens most often with mutually exclusive projects that differ significantly in initial investment size or in the timing of their cash flows. When they conflict, corporate finance practice recommends trusting NPV, since it directly reflects the dollar value added to the firm, whereas IRR's reinvestment assumption can be unrealistic for high-IRR projects.

What is a 'good' IRR for a business investment?

A 'good' IRR is one that exceeds your cost of capital or hurdle rate — for many small and mid-sized businesses that's in the 15%-25% range, though it varies heavily by industry risk profile. Real estate or venture-backed projects often target 20%+, while lower-risk equipment purchases might use a 10%-12% hurdle.

Can NPV or IRR be negative, and what does that mean?

Yes — a negative NPV means the project's discounted cash inflows are worth less than the initial investment at your chosen discount rate, so it destroys value and should be rejected. A negative or undefined IRR typically occurs when a project never generates enough cumulative discounted cash flow to recover the initial investment.

NPV & IRR Calculator for Capital Investments in 2026

Calculate the Net Present Value and Internal Rate of Return of a capital investment from your initial cost and projected annual cash flows.

Initial Investment ($)

Discount Rate / WACC (%)

Number of Years

Year 1 Cash Flow ($)

Year 2 Cash Flow ($)

Year 3 Cash Flow ($)

Year 4 Cash Flow ($)

Year 5 Cash Flow ($)

Display Currency

Capital Investment NPV & IRR Calculator

Enter your initial investment, discount rate, and projected cash flows to calculate NPV and IRR.

Mathematical Audit

How NPV & IRR Are Calculated

NPV discounts every future cash flow back to today's dollars and subtracts the initial investment. IRR is the discount rate at which that same calculation equals exactly zero.

NPV = Σ [Cash Flow (Year t) ÷ (1 + Discount Rate)^t] − Initial Investment

IRR = the discount rate r where NPV = 0 (solved iteratively)

Profitability Index = (NPV + Initial Investment) ÷ Initial Investment

A positive NPV means the investment creates value at your chosen discount rate and should be accepted; a negative NPV means it destroys value. When NPV and IRR give conflicting rankings for mutually exclusive projects, NPV is the more reliable dollar-value metric to trust.

Operational Guide

How to Use the NPV & IRR Calculator

Enter your Initial Investment

The total upfront cost of the project or purchase.

Set the Discount Rate

Usually your Weighted Average Cost of Capital (WACC) or a target hurdle rate.

Select the Number of Years

How many years of cash flow you want to project, up to 10.

Enter each year's Cash Flow

The expected net cash inflow for each year of the projection.

Review your results

See NPV, IRR, payback period, and profitability index, plus an accept/reject recommendation.

Real-World Scenario Example

"A company invests $100,000 upfront expecting $25,000 in cash flow for each of the next 5 years, using a 10% discount rate."

Inputs

initialInvestment:100000

numberOfYears:5

discountRate:10

period1CashFlow:25000

period2CashFlow:25000

period3CashFlow:25000

period4CashFlow:25000

period5CashFlow:25000

Result

NPV ≈ −$5,236, IRR ≈ 7.9% — since IRR is below the 10% hurdle rate and NPV is negative, the project should be rejected as structured.

Important Disclaimer

This calculator provides an estimate based on the cash flows and discount rate you enter. Actual investment returns depend on the accuracy of your cash flow projections, which are inherently uncertain.

Internal Linking

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E-E-A-T Genuineness

Sources & References

Corporate Finance Institute — Net Present Value (NPV)

https://corporatefinanceinstitute.com/resources/valuation/net-present-value-npv/

Corporate Finance Institute — NPV vs IRR

https://corporatefinanceinstitute.com/resources/valuation/npv-vs-irr/

Calculator Inputs

Calculation Results

Capital Investment NPV & IRR Calculator

How NPV & IRR Are Calculated

How to Use the NPV & IRR Calculator

Enter your Initial Investment

Set the Discount Rate

Select the Number of Years

Enter each year's Cash Flow

Review your results

Real-World Scenario Example

Important Disclaimer

What is the difference between NPV and IRR?

What discount rate should I use for NPV?

What if NPV and IRR give conflicting recommendations?

What is a 'good' IRR for a business investment?

Can NPV or IRR be negative, and what does that mean?

Related Calculators

Return on Invested Capital (ROIC) Calculator

Equipment Financing: Lease vs Buy Calculator

Debt Service Coverage Ratio (DSCR) Calculator

Sources & References

Calculator Inputs

Calculation Results

Capital Investment NPV & IRR Calculator