NPV and IRR Calculator

Evaluate the economic viability of projects, investments, and equipment acquisitions. Calculate the Net Present Value (NPV) to discount future cash flows, determine the Internal Rate of Return (IRR), and estimate the Discounted Payback under a Minimum Attractive Rate (MAR).

Quick Scenarios:

New Franchise ($150,000) IT Development ($80,000) New Equipment ($200,000)

Investment Parameters

Initial Investment (Year 0)

Initial capital invested in the project (outflow of cash).

Minimum Attractive Rate (MAR)

% p.a.

Minimum rate of return required by the investor.

Annual Cash Flows

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Fill in the data and click on Calculate Viability to run the simulation.

Net Present Value (NPV)

$0.00

Internal Rate of Return (IRR)

0.00%

Investment Status

Discounted Payback

0 years

Total Nominal Profit

$0.00

NPV / Initial Investment

0.00%

Accumulated Balance: Nominal vs. Discounted

Annual Cash Flows

Detailed Discounted Cash Flows

Year	Nominal Cash Flow (FC)	Discount Factor	Discounted Cash Flow (VP)	Accumulated Nominal Balance	Accumulated Discounted Balance

What are NPV, IRR, and MAR in investment analysis?

When analyzing the financial viability of projects or the purchase of productive assets (such as machinery or opening a branch), simple financial mathematics formulas, such as the nominal sum of future profits, are insufficient. This is because money has a time value (a dollar of profit today is worth more than a dollar of profit in 5 years). To overcome this, we use NPV, IRR, and MAR.

MAR - Minimum Attractive Rate

MAR represents the minimum interest rate that an investor requires to invest their capital in a project. It reflects the opportunity cost (how much the capital would yield if invested in a risk-free option, such as the Treasury rate or CDI (interbank rate)) plus the risk premium of the project itself.

For example, if the investor can obtain 10% p.a. in fixed income without risk, the MAR for opening a business should be significantly higher (e.g., 15% p.a.) to compensate for the uncertainty of the operation.

NPV - Net Present Value

NPV brings all future cash flows generated by the project back to the present date, applying the MAR discount rate, and subtracts the initial investment. In practical terms, it indicates whether the project generates additional value beyond the minimum required rate.

NPV Greater than Zero ($NPV > 0$): The project is viable. It recovers the initial investment, meets the MAR, and generates excess profit measured in USD.
NPV Equal to Zero ($NPV = 0$): The project is indifferent. It pays the initial investment and yields exactly the equivalent of the MAR.
NPV Less than Zero ($NPV < 0$): The project is unviable. Not because it generates operational nominal losses, but because it yields less than the minimum required rate (MAR).

IRR - Internal Rate of Return

IRR is the intrinsic yield rate of the investment project. It is defined mathematically as the interest rate that zeros out the NPV of the project. In decision-making, we compare IRR to MAR:

If IRR > MAR, the project is viable, as it yields more than the minimum required rate.
If IRR < MAR, the project is unviable, and it is better to invest the money in other alternatives with the MAR.

Frequently Asked Questions

The Discounted Payback is the time needed to recover the initial investment, considering the time value of money. Unlike the Simple Payback, which only sums nominal profits until it breaks even, the Discounted Payback brings each future profit to its present value using the MAR, calculating the real time it will take for the investor to recover the initial capital.

IRR assumes that all intermediate cash flows are reinvested at the same IRR, which is not always realistic (the MAR or financial market rate is a more plausible reinvestment rate). Additionally, if annual cash flows alternate between positive and negative (sign change), the project may have multiple IRRs or no real solution, in which case NPV is a more reliable indicator.

To define the MAR, start with the risk-free savings rate (such as the Treasury rate or CDI (interbank rate)). Then, add a risk rate proportional to the business risk (micro-franchises typically have higher risks than expanding an already consolidated company). If you are financing part of the capital, the MAR should also cover the Weighted Average Cost of Capital (WACC).