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Is the Project Worth More Than Its Cost?

A $50,000 investment yielding $15,000/year for 5 years at a 10% discount rate has an NPV of about $6,862 (positive = value-creating). At 15% the NPV turns negative — the discount rate, your cost of capital, decides the verdict.

Results

Visualization

Cashbizly provides illustrative business estimates only. Results depend on your inputs and assumptions and are not accounting, tax, or legal advice. Consult a CPA or financial advisor before major decisions. Tax-year figures (mileage, QBI, SEP, etc.) are labelled by year and should be verified at IRS.gov.

How It Works

NPV = -Initial + sum( CashFlow_t / (1+r)^t ). A positive NPV means the project returns more than your discount rate (cost of capital) and creates value; negative means it destroys value. The discount rate should reflect your risk and financing cost. This is the standard capital-budgeting criterion, superior to payback because it accounts for time value and all years.

What Should You Do?

Scenario 1: a lower 8% rate lifts NPV, making more projects pass. Scenario 2: a 6th year of $15k adds ~$8.5k PV at 10%. Scenario 3: if cash flows are uncertain, stress-test the rate and flows before committing.

Frequently Asked Questions

What discount rate?

Your cost of capital or required return; higher risk justifies a higher rate, which filters weak projects.

NPV vs IRR?

NPV gives a dollar value and handles uneven flows; IRR gives a rate but can be ambiguous with non-conventional flows.

Positive NPV always good?

Yes in theory — but only if inputs are honest; garbage cash flows give garbage NPV.

Authoritative References

Investopedia — NPV — Net present value formula and interpretation.
Corporate Finance Institute — NPV — NPV vs other capital-budgeting tools.