Evaluate investment opportunities using discounted cash flow (DCF) analysis. Calculate net present value (NPV), estimate internal rate of return (IRR), and visualize how future cash flows translate to present value. Educational use only, not financial or investment advice.
Enter investment details and cash flow projections
Enter an initial investment, a discount rate, and either constant or custom yearly cash flows to see discounted cash flows, cumulative NPV over time, and a simple IRR estimate.
Discounted Cash Flow (DCF) is a valuation method that estimates the value of an investment based on its expected future cash flows. The core idea is that money received in the future is worth less than money today due to the time value of money. DCF converts future cash flows to their present value using a discount rate.
Net Present Value is the sum of all discounted cash flows, including the initial investment (as a negative cash flow). NPV tells you the total value created or destroyed by an investment at a given discount rate:
NPV = Σ [Cash Flow(t) / (1 + r)^t]
Where t = year (0, 1, 2, ...) and r = discount rate
Year 0 cash flow (the initial investment) is not discounted. Subsequent years are discounted progressively more as they are further in the future.
IRR is the discount rate at which the NPV equals zero. It represents the "break-even" rate of return for an investment. If an investment's IRR exceeds your required return (discount rate), the NPV will be positive. This tool estimates IRR using a numerical approximation.
The discount rate reflects the opportunity cost of capital and the risk of the investment. Common approaches include using the weighted average cost of capital (WACC), a required rate of return, or a hurdle rate. Higher discount rates result in lower present values for future cash flows.
Disclaimer: This calculator is for educational and planning purposes only and does not provide financial, accounting, tax, or investment advice. The results are estimates based on simplified assumptions. Consult with qualified professionals for actual investment decisions.
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