Capital Budgeting Calculator
This capital budgeting calculator appraises an investment project against the four measures finance teams reach for most often, all from one set of inputs. You enter the upfront cost of the project, the discount rate that reflects your cost of capital or required return, and the cash the project is expected to generate in each of the next five years. The calculator then discounts those future cash flows back to today and reports the net present value, the dollar value the project adds after covering your required return. It solves for the internal rate of return, the single discount rate at which the project exactly breaks even, so you can compare it against your hurdle rate. It measures the payback period, the point at which the running total of cash flows repays the initial outlay, giving a quick read on how long your money is tied up. Finally it computes the profitability index, the present value of the inflows divided by the cost, which is handy for ranking projects when the budget will not stretch to all of them. Bringing these together lets you judge a single project or line up several and pick the strongest. Treat the results as a decision aid built on your own estimates, not a guarantee, since the answers are only as good as the cash flow forecasts you feed in.
Enter the cash the project produces each year as a positive number. Leave a year at zero if there is no cash flow.
A positive NPV and an IRR above your discount rate both point to a project that adds value. The results depend entirely on your cash flow estimates and are a decision aid, not advice.
How it works
Each year's cash flow is discounted back to today by dividing it by one plus the discount rate raised to the power of the year. Adding those present values and subtracting the initial investment gives the net present value. The internal rate of return is found by searching for the discount rate that makes the net present value exactly zero, which the calculator does by narrowing the range until it converges. The payback period counts how many years of cash flow it takes to recover the initial outlay, with the final part-year worked out from the fraction still owing. The profitability index divides the present value of the inflows by the initial cost, so anything above 1 signals value created.
Worked example
A project costs $100,000 up front and is expected to return $30,000 a year for five years, and you use a 10% discount rate. Discounting the five $30,000 cash flows at 10% gives a present value of about $113,724, so the net present value is $113,724 less $100,000, which is about $13,724. The internal rate of return, the rate that would drive that NPV to zero, is about 15.24%, comfortably above the 10% hurdle. The running total of cash reaches $90,000 after three years and needs $10,000 of the fourth year's $30,000, so the payback period is about 3.33 years. The profitability index is $113,724 divided by $100,000, about 1.14, meaning $1.14 of value for every dollar invested.
Related calculators
- NPV Calculator: net present value in detail.
- IRR Calculator: internal rate of return.
- Payback Period Calculator: time to recover the cost.
- Discounted Payback Period Calculator: payback after discounting.
- ROI Calculator: simple return on investment.
Frequently asked questions
What does a capital budgeting calculator do?
It appraises an investment project against the four standard tests at once: net present value, internal rate of return, payback period and profitability index. You enter the upfront cost, a discount rate and the cash the project throws off each year, and it reports whether the project adds value and how quickly it pays for itself.
Should I accept a project if NPV is positive?
A positive net present value means the project earns more than your discount rate, so it adds value and passes the main test. Check the internal rate of return sits above your required return and that the payback period fits your horizon, then rank competing projects by NPV or profitability index when budgets are limited.
What is the profitability index?
The profitability index is the present value of the future cash flows divided by the initial investment. A value above 1 means the project creates value for every dollar put in, and it is useful for ranking projects when you cannot fund them all. An index of 1.14 means 1.14 dollars of value for each dollar invested.
If you've found a bug, or would like to contact us, or learn more about James Graham and Calculate.co.nz.
Calculate.co.nz is partnered with Interest.co.nz for New Zealand's highest quality calculators and financial analysis.
Calculate.co.nz is the sister site of CalculatorHub.com, the world's largest calculator website by tool count.
All calculators and tools are provided for educational and indicative purposes only and do not constitute financial advice.
Calculate.co.nz is proudly part of the Realtor.co.nz group, New Zealand's leading property transaction literacy platform, helping Kiwis understand the home buying and selling process from start to finish. Whether you're a first home buyer navigating your first property purchase, an investor evaluating your next acquisition, or a homeowner planning to sell, Realtor.co.nz provides clear, independent, and trustworthy guidance on every step of the New Zealand property transaction journey.
Calculate.co.nz is also partnered with Health Based Building and Premium Homes to promote informed choices that lead to better long-term outcomes for Kiwi households.
Calculate.co.nz is hosted in Auckland by SiteHost New Zealand.
All content on this website, including calculators, tools, source code, and design, is protected under the Copyright Act 1994 (New Zealand). No part of this site may be reproduced, copied, distributed, stored, or used in any form without prior written permission from the owner.
About & trust: Why Calculate is NZ's most comprehensive · By the Numbers · How we compare · Editorial standards · How we keep data current · NZ finance glossary · Research & data · Financial literacy NZ · About · Privacy policy · Terms of use
Reviewed and maintained. Last reviewed 2026-08-15 and checked on a twice-monthly cycle against IRD, RBNZ and Stats NZ. How we keep data current.
© 2026 Calculate.co.nz. All rights reserved. Building free NZ calculators since 2011.