Decision rule
Accept projects with NPV ≥ 0 at your required return.
Compare mutually exclusive projects by highest NPV, not highest IRR alone.
Key takeaways
- NPV accounts for scale and timing
- Use WACC or project-specific hurdle rate
Related calculators
Apply these concepts with formula-based tools on Calculator Factory.
- FinanceNPV Calculator
Calculate net present value for a series of cash flows at a given discount rate to evaluate project profitability.
- FinanceIRR Calculator
Calculate the internal rate of return for a cash flow series — the discount rate that sets NPV to zero.
- FinancePayback Period Calculator
Calculate the simple payback period — how long it takes to recover an initial investment from level annual cash flows.
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FAQ
- What discount rate?
- Use WACC for average-risk operating projects or adjust for project-specific risk.