Financial Calculator Npv – Loan calculator

Net Present Value (NPV) Calculator

Initial Investment (Cost):

Discount Rate (%):

Cash Flow Year 1:

Cash Flow Year 2:

Cash Flow Year 3:

Cash Flow Year 4:

Cash Flow Year 5:

function calculateNPV() { var initialInvestment = parseFloat(document.getElementById('initialInvestment').value); var discountRate = parseFloat(document.getElementById('discountRate').value); var cashFlow1 = parseFloat(document.getElementById('cashFlow1').value); var cashFlow2 = parseFloat(document.getElementById('cashFlow2').value); var cashFlow3 = parseFloat(document.getElementById('cashFlow3').value); var cashFlow4 = parseFloat(document.getElementById('cashFlow4').value); var cashFlow5 = parseFloat(document.getElementById('cashFlow5').value); if (isNaN(initialInvestment) || isNaN(discountRate) || isNaN(cashFlow1) || isNaN(cashFlow2) || isNaN(cashFlow3) || isNaN(cashFlow4) || isNaN(cashFlow5)) { document.getElementById('npvResult').innerHTML = 'Please enter valid numbers for all fields.'; return; } if (discountRate < 0) { document.getElementById('npvResult').innerHTML = 'Discount rate should generally be non-negative for typical NPV calculations.'; return; } var rateDecimal = discountRate / 100; var npv = -initialInvestment; npv += cashFlow1 / Math.pow(1 + rateDecimal, 1); npv += cashFlow2 / Math.pow(1 + rateDecimal, 2); npv += cashFlow3 / Math.pow(1 + rateDecimal, 3); npv += cashFlow4 / Math.pow(1 + rateDecimal, 4); npv += cashFlow5 / Math.pow(1 + rateDecimal, 5); var resultElement = document.getElementById('npvResult'); resultElement.innerHTML = '

Calculated Net Present Value (NPV):

'; resultElement.innerHTML += 'NPV: $' + npv.toFixed(2) + "; if (npv > 0) { resultElement.innerHTML += 'A positive NPV suggests the project is expected to be profitable and should be considered.'; } else if (npv < 0) { resultElement.innerHTML += 'A negative NPV suggests the project is expected to lose money and should be rejected.'; } else { resultElement.innerHTML += 'An NPV of zero suggests the project is expected to break even, neither gaining nor losing value.'; } } .calculator-container { background-color: #f9f9f9; border: 1px solid #ddd; padding: 20px; border-radius: 8px; max-width: 600px; margin: 20px auto; font-family: 'Segoe UI', Tahoma, Geneva, Verdana, sans-serif; } .calculator-container h2 { color: #333; text-align: center; margin-bottom: 20px; } .calc-input-group { margin-bottom: 15px; display: flex; flex-direction: column; } .calc-input-group label { margin-bottom: 5px; color: #555; font-weight: bold; } .calc-input-group input[type="number"] { padding: 10px; border: 1px solid #ccc; border-radius: 4px; font-size: 16px; width: 100%; box-sizing: border-box; } .calculate-button { background-color: #007bff; color: white; padding: 12px 20px; border: none; border-radius: 4px; cursor: pointer; font-size: 18px; width: 100%; box-sizing: border-box; transition: background-color 0.3s ease; } .calculate-button:hover { background-color: #0056b3; } .calc-result { margin-top: 20px; padding: 15px; border: 1px solid #e0e0e0; border-radius: 4px; background-color: #eaf4ff; text-align: center; } .calc-result h3 { color: #007bff; margin-top: 0; margin-bottom: 10px; } .calc-result p { margin: 5px 0; font-size: 16px; color: #333; } .calc-result .positive-npv { color: #28a745; /* Green for positive */ font-weight: bold; } .calc-result .negative-npv { color: #dc3545; /* Red for negative */ font-weight: bold; } .calc-result .zero-npv { color: #ffc107; /* Yellow/Orange for zero */ font-weight: bold; } .calc-result .error { color: #dc3545; font-weight: bold; }

Understanding the Net Present Value (NPV) Calculator

The Net Present Value (NPV) is a fundamental concept in financial analysis, widely used to evaluate the profitability of a projected investment or project. It helps businesses and individuals decide whether a project is worth undertaking by comparing the present value of all future cash inflows (benefits) to the present value of all cash outflows (costs) over a specific period.

What is Net Present Value (NPV)?

In simple terms, NPV measures the difference between the present value of cash inflows and the present value of cash outflows over a period of time. It accounts for the "time value of money," which means that a dollar today is worth more than a dollar in the future due to its potential earning capacity. The discount rate is crucial here, as it represents the rate of return that could be earned on an investment in the financial markets with similar risk.

How the NPV Calculator Works

Our NPV calculator takes several key inputs to determine the net present value of your project:

Initial Investment (Cost): This is the upfront capital expenditure required to start the project. It's typically a negative cash flow (an outflow) at the beginning of the project.
Discount Rate (%): Also known as the required rate of return, hurdle rate, or cost of capital. This percentage reflects the opportunity cost of investing in this project versus an alternative investment of similar risk. A higher discount rate means future cash flows are worth less in today's terms.
Cash Flow Year 1 to Year 5: These are the estimated net cash inflows (or outflows) expected from the project for each subsequent year. Positive values represent money coming into the project, while negative values would represent additional costs.

The NPV Formula

The formula for calculating NPV is as follows:

NPV = (CF1 / (1 + r)^1) + (CF2 / (1 + r)^2) + ... + (CFn / (1 + r)^n) - Initial Investment

Where:

CFt = Net cash flow during period t
r = Discount rate (as a decimal)
n = Number of periods (years)
Initial Investment = The cash outflow at time zero (t=0)

Interpreting Your NPV Results

Positive NPV (NPV > 0): If the calculated NPV is positive, it means that the project's expected earnings, discounted back to their present value, exceed the initial investment. This suggests the project is expected to be profitable and should be considered for acceptance, as it is projected to add value to the company or individual.
Negative NPV (NPV < 0): A negative NPV indicates that the project's expected future cash flows, when discounted, are less than the initial investment. This implies the project is expected to lose money and should generally be rejected, as it would diminish value.
Zero NPV (NPV = 0): An NPV of zero suggests that the project is expected to break even. The present value of its cash inflows exactly equals the initial investment. In such a case, the decision to accept or reject might depend on other qualitative factors.

Why is NPV Important?

NPV is a powerful tool because it:

Considers the Time Value of Money: It accurately reflects that money available today is worth more than the same amount in the future.
Provides a Clear Decision Rule: The "accept if positive, reject if negative" rule is straightforward.
Accounts for All Cash Flows: It includes all relevant cash inflows and outflows over the project's life.
Measures Value Added: A positive NPV directly indicates the amount of value a project is expected to add.

Example Calculation

Let's use the default values in the calculator:

Initial Investment: $100,000
Discount Rate: 10% (0.10)
Cash Flow Year 1: $30,000
Cash Flow Year 2: $40,000
Cash Flow Year 3: $50,000
Cash Flow Year 4: $35,000
Cash Flow Year 5: $25,000

Calculation:

Year 1: $30,000 / (1 + 0.10)^1 = $27,272.73
Year 2: $40,000 / (1 + 0.10)^2 = $33,057.85
Year 3: $50,000 / (1 + 0.10)^3 = $37,565.74
Year 4: $35,000 / (1 + 0.10)^4 = $23,900.09
Year 5: $25,000 / (1 + 0.10)^5 = $15,522.92

Sum of Present Values of Cash Flows = $27,272.73 + $33,057.85 + $37,565.74 + $23,900.09 + $15,522.92 = $137,319.33

NPV = $137,319.33 – $100,000 = $37,319.33

Since the NPV is positive, this project would be considered financially attractive under these assumptions.