NPV with Working Capital Calculator
Most capital expansion requires inventory and receivables funding (NWC) at startup, which is recaptured when the project winds down.
The project earns more than the required return at the selected discount rate. Value is expected to be added to the firm.
Bars: present value of each period (Year 0 is initial outlay). Polyline: running cumulative total. When the line crosses zero, the project achieves economic break-even in today's money.
| Year | Cash flow | Discount factor | Present value | Running total |
|---|---|---|---|---|
| Year 0 | -$4,000,000 | 1.0000 | -$4,000,000 | -$4,000,000 |
| Year 1 | $900,000 | 0.9091 | $818,182 | -$3,181,818 |
| Year 2 | $1,100,000 | 0.8264 | $909,091 | -$2,272,727 |
| Year 3 | $1,300,000 | 0.7513 | $976,709 | -$1,296,018 |
| Year 4 | $1,500,000 | 0.6830 | $1,024,520 | -$271,498 |
| Year 5 | $2,200,000 | 0.6209 | $1,366,027 | $1,094,529 |
| Discount Rate | Scenario | Net Present Value | Variance vs Base | Viability |
|---|---|---|---|---|
| 6.0% | -400 bps | $1,751,666 | +$657,137 | Accept |
| 8.0% | -200 bps | $1,408,216 | +$313,687 | Accept |
| 9.0% | -100 bps | $1,247,861 | +$153,332 | Accept |
| 10.0%Active | Base Case (Active) | $1,094,529 | — (Base) | Accept |
| 11.0% | +100 bps | $947,834 | -$146,695 | Accept |
| 12.0% | +200 bps | $807,415 | -$287,114 | Accept |
| 14.0% | +400 bps | $544,082 | -$550,447 | Accept |
| 18.8%IRR | Break-Even (IRR) | $0 | -$1,094,529 | Break-Even |
Sensitivity analysis reveals how NPV shifts when corporate borrowing costs or inflation vary. As the discount rate increases, present value decreases.
Formula & Calculation Logic
Total Year 0 Outflow = Capex + NWC. Terminal Year Inflow includes NWC Recovery.This financial model applies precise periodic compounding to establish the exact present economic value of future cash inflows against the required initial investment.
Key Capabilities & Features
- Tracks initial NWC commitment
- Accounts for terminal NWC release
- True lifecycle project return calculation
Frequently Asked Questions
What is Net Present Value (NPV)?
Net Present Value (NPV) is a core financial metric used in capital budgeting to analyze the profitability of a projected investment or project. NPV calculations take into account the time value of money by discounting expected future cash flows back to their present value using a specified discount rate (such as WACC or required rate of return). If the NPV is positive, the project is projected to generate surplus value over and above its cost of capital.
Can NPV be negative and what does it mean?
A negative Net Present Value indicates that the projected cash inflows, when discounted at the selected hurdle rate, fail to recover the initial investment outlay and capital costs. It does NOT necessarily mean the project loses nominal money—it means the investment earns a rate of return strictly lower than the required discount rate. For instance, if your discount rate is 12% and the project earns 8%, the nominal cash flow may be positive, but the NPV will be negative.