NPV Calculator
Net Present Value is the gold standard for investment decisions. If NPV > 0, the project creates more value than the cost of capital. If NPV < 0, reject it.
NPV in Government and Corporate Finance by Country
| Institution | Discount Rate | Framework |
|---|---|---|
| 🇺🇸 US OMB (government) | 7% real | Circular A-94 |
| 🇬🇧 HM Treasury | 3.5% real | Green Book |
| 🇦🇺 Australian Government | 7% real | Finance Guidance |
| 🇨🇦 Canadian Government | 8% real | Treasury Board |
| 🇪🇺 European Commission | 5% real | JASPERS / Cohesion Fund |
Frequently Asked Questions
What is NPV?
Net Present Value (NPV) is the sum of the present values of all future cash flows from an investment, minus the initial investment. A positive NPV means the project creates value (accept it); a negative NPV means it destroys value (reject it).
How is NPV used in the UK versus the US?
In the US, the OMB uses NPV for regulatory cost-benefit analysis with a 7% real discount rate. In the UK, HM Treasury's Green Book mandates NPV analysis with a 3.5% real social discount rate for public projects. Both use the same NPV formula but different discount rates, leading to different project valuations.
When should I use NPV vs IRR?
Use NPV when you want to know the absolute dollar value created by a project. Use IRR when you want to compare the percentage return across projects of different sizes. For mutually exclusive projects, NPV is the correct decision rule — a project with lower IRR but higher NPV creates more value. The UK Green Book specifically prefers NPV over IRR for this reason.