Capital budgeting decisions rest on discounted cash flow. Enter the initial investment and projected cash flows to see NPV, IRR, MIRR, profitability index and payback periods — the full set of metrics an investment committee expects.
How it works
Evaluate a capital project or investment: net present value, internal rate of return, modified IRR, profitability index, and simple and discounted payback.
NPV = Σ CFₜ ÷ (1 + r)ᵗ, t = 0…n
IRR: the rate where NPV = 0
MIRR = (FV of inflows at reinvestment rate ÷ PV of outflows at r)^(1/n) − 1
Profitability index = PV of inflows ÷ PV of outflows
Payback = periods until cumulative cash flow turns positive (interpolated)Common uses
- Capital expenditure approval
- Equipment, technology and expansion projects
- Comparing mutually exclusive investments
Worked example
The calculator above opens with this example. Change any input to see the results update instantly, or select Reset to return to these figures.
| Discount rate (hurdle) | 10% |
| Reinvestment rate (MIRR) | 8% |
| Cash flows by period (period 0 first) | -500,000 120,000 145,000 160,000 175,000 190,000 |
| Net present value | $86,638 |
| IRR | 16.07% |
| MIRR | 12.76% |
| Profitability index | 1.17 |
| Payback | 3.43 periods |
| Discounted payback | 4.27 periods |
Accept: the project earns more than the 10.0% hurdle and adds $86,638 of value.
Interpreting the results
- NPV is the primary decision rule: accept projects with NPV ≥ 0 when capital is not constrained.
- IRR assumes interim cash flows are reinvested at the IRR itself; MIRR uses a more realistic reinvestment rate.
- When capital is rationed, rank projects by profitability index rather than NPV.
Frequently asked questions
What is a good NPV?
Any positive NPV means the project is expected to earn more than the discount rate and add value. When comparing projects of different size, rank them with the profitability index or by NPV within a capital constraint.
Why can NPV and IRR rank projects differently?
IRR assumes interim cash flows are reinvested at the IRR itself and ignores project scale, while NPV measures absolute value created at the cost of capital. When the two conflict on mutually exclusive projects, NPV is the theoretically preferred criterion.
What is MIRR and when should I use it?
Modified IRR assumes cash flows are reinvested at a realistic reinvestment rate and finance costs are at the financing rate. It avoids the multiple-IRR problem with non-conventional cash flows and is usually a more conservative return measure.
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