NPV & Payback Period Calculator
A rupee today is worth more than a rupee next year. Net present value is how capital budgeting accounts for that — and payback period answers the simpler question of how long the money takes to come back.
NPV & payback period calculator
Whether a project is worth doing (NPV), and how long it takes to get the money back, both in simple terms and discounted for the time value of money — with the full year-by-year cash flow schedule.
| Year | Cash flow | Discount factor | Present value | Cumulative PV |
|---|---|---|---|---|
| 0 | ₹-10,00,000 | 1.000 | ₹-10,00,000 | ₹-10,00,000 |
| 1 | ₹3,00,000 | 0.909 | ₹2,72,727 | ₹-7,27,273 |
| 2 | ₹3,00,000 | 0.826 | ₹2,47,934 | ₹-4,79,339 |
| 3 | ₹3,00,000 | 0.751 | ₹2,25,394 | ₹-2,53,944 |
| 4 | ₹3,00,000 | 0.683 | ₹2,04,904 | ₹-49,040 |
| 5 | ₹3,00,000 | 0.621 | ₹1,86,276 | ₹1,37,236 |
Educational illustration only. Assumes equal annual cash inflows for simplicity — a real project’s cash flows are rarely perfectly level, and would need year-by-year figures for an accurate NPV.
Why NPV discounts future cash flows
Money received later is worth less than the same amount today — it could have been earning a return in the meantime. The discount rate represents that opportunity cost. Each year’s cash inflow is multiplied by a discount factor (1 ÷ (1 + rate)^year) to express it in today’s money, then all the discounted amounts are summed and compared against the initial investment. A positive NPV means the project is expected to create value above that discount rate; a negative NPV means it isn’t.
Simple payback vs discounted payback
Simple payback (Initial Investment ÷ Annual Cash Inflow) ignores the time value of money entirely — it just asks how many years of undiscounted cash flow it takes to recover the investment. Discounted payback uses the same discounted cash flows as NPV, so it always takes longer than simple payback (or never happens at all, if the project’s NPV is negative within its life) — a more honest measure of how quickly a project actually breaks even.
Educational illustration only, not investment or business advice. Real capital budgeting decisions weigh NPV alongside IRR, risk, strategic fit, and cash flows that are rarely perfectly level year to year.
Get the live Excel version
Download a real workbook with the same schedule as a live formula — change any input and NPV, payback and every row recalculate automatically.