NPV Calculator (Net Present Value, VND)
If you are weighing a business project, a piece of equipment, or a long-term investment while living in Vietnam, the numbers run into the hundreds of millions or billions of Vietnamese dong — and the central question is the same everywhere: once you bring every future cash flow back to today's money, does this project actually add value? A dong received six years from now is worth less than a dong in your hand today, because today's dong can be put to work. Net Present Value (NPV) formalises exactly that intuition.
NPV discounts each future cash flow back to the present using a required rate of return (the discount rate), then subtracts the upfront investment. The decision rule is refreshingly simple: NPV > 0 means the project creates value (it earns more than your required return) and is worth doing; NPV < 0 means it destroys value versus putting the money elsewhere. In the worked example in the tool above — invest 1.000.000.000 VND upfront, receive 250.000.000 VND each year for 6 years, discounted at an illustrative 10%/year — NPV comes to 88.815.175 VND. Because that figure is positive, the rule says you should ACCEPT the project.
Here is the trap NPV protects you from. The undiscounted inflows total 1.500.000.000 VND, which minus the 1.000.000.000 VND outlay looks like a 500.000.000 VND "profit". But once you discount those inflows to today, the real surplus is only 88.815.175 VND — the 411.184.825 VND difference is the time value of money the naive calculation ignored. One caveat governs everything on this page: the 10%/year discount rate is an illustrative assumption, not a market quote. It represents your cost of capital, borrowing rate, or the return on a safer alternative — swap in the rate that fits your situation.
How the calculator computes NPV
The core formula
$$NPV = -C_0 + \sum_{t=1}^{n} \dfrac{CF_t}{(1+r)^t}$$
| Symbol | Meaning |
|---|---|
| C₀ | Initial investment (cash outflow at year 0) |
| CFₜ | Cash flow received at the end of year t |
| r | Annual discount rate / required return as a decimal (10% = 0.1) |
| n | Project lifespan in years |
| (1+r)^t | Discount factor that pulls year-t money back to today |
This tool assumes the inflows are constant (CFₜ = CF for every t) to keep the arithmetic followable, so the formula collapses to NPV = −C₀ + CF × Σ 1/(1+r)^t. The calculator accumulates year by year exactly like the loop in the worked table below, so every figure is reproducible.
What is the discount rate, and where does it come from?
The discount rate is the minimum return you demand to take on the project's risk. People typically use their weighted average cost of capital (WACC), a bank borrowing rate, or the return available on a safer alternative. Higher risk should push the rate up — which pushes NPV down. Crucially, this is an assumption you set, not a fixed market number; changing it can flip the verdict, so always test a range (see the sensitivity table below).
The decision rule
- NPV > 0: the project earns more than your required return → it adds value → accept.
- NPV = 0: the project exactly meets your required return → indifferent.
- NPV < 0: the project falls short of your required return → it destroys value → reject.
When choosing between mutually exclusive projects, pick the one with the highest NPV (not the highest percentage return). NPV and IRR are two views of the same calculation: the IRR is simply the discount rate that makes NPV equal zero — FiMo has a dedicated IRR calculator if you prefer that lens.
What the model leaves out
The tool assumes equal annual inflows, received at the end of each year, a constant discount rate across the whole life, and no taxes, inflation adjustment, or terminal/salvage value. Real cash flows are rarely that even or certain, so treat the output as a scenario for comparison, not a guarantee.
Worked example: invest 1.000.000.000 VND, receive 250.000.000 VND/year for 6 years
Illustrative assumptions: a 10%/year discount rate (the investor's required return), inflows at the end of each year, no taxes or inflation.
| Year (t) | Cash flow | Discount factor 1/(1+r)^t | Present value |
|---|---|---|---|
| 0 | −1.000.000.000 | 1.0000 | −1.000.000.000 |
| 1 | 250.000.000 | 0.9091 | 227.272.727 |
| 2 | 250.000.000 | 0.8264 | 206.611.570 |
| 3 | 250.000.000 | 0.7513 | 187.828.700 |
| 4 | 250.000.000 | 0.6830 | 170.753.364 |
| 5 | 250.000.000 | 0.6209 | 155.230.331 |
| 6 | 250.000.000 | 0.5645 | 141.118.483 |
| Sum of discounted inflows | 1.088.815.175 | ||
| NPV | 88.815.175 |
The discounted inflows total 1.088.815.175 VND; subtract the 1.000.000.000 VND outlay and you get NPV = 88.815.175 VND. A positive NPV means the rule says ACCEPT this project at a 10% discount rate. Notice how the present-value column shrinks each year even though the cash flow is identical — year 6's 250.000.000 VND is worth only 141.118.483 VND in today's money.
Sensitivity: how NPV moves with the discount rate
Because the discount rate is an assumption, always test a range to see whether the verdict holds:
| Discount rate (assumed) | NPV | Verdict |
|---|---|---|
| 8%/year | 155.719.916 | Accept |
| 10%/year | 88.815.175 | Accept |
| 12%/year | 27.851.831 | Accept |
| 15%/year | -53.879.327 | Reject |
The higher the discount rate, the lower the NPV — and beyond some threshold it turns negative. That break-even threshold is the internal rate of return (IRR). If you are unsure which rate to set, pair this with FiMo's IRR calculator to find the project's true return, then compare it against your own cost of capital.
Frequently asked questions
What is Net Present Value (NPV)?
NPV is the sum of all of a project's future cash flows, discounted back to today, minus the upfront investment. It tells you whether the project adds to or subtracts from your wealth relative to your required return. Illustrative example: invest 1.000.000.000 VND, receive 250.000.000 VND/year for 6 years, discounted at an illustrative 10%/year, gives NPV = 88.815.175 VND.
What is the NPV formula and how do the variables work?
NPV = −C₀ + Σ CFₜ / (1+r)^t for t from 1 to n. C₀ is the initial outlay, CFₜ the cash flow in year t, r the discount rate as a decimal, n the number of years. Verifiable: −1.000.000.000 + 250.000.000×(1/1.1¹ + … + 1/1.1⁶) = −1.000.000.000 + 1.088.815.175 = 88.815.175 VND at 10%/year over 6 years.
Should I invest if NPV is positive or negative?
The rule: accept when NPV > 0 (the project earns more than your required return and adds value); reject when NPV < 0 (it falls short and destroys value); NPV = 0 is break-even and neutral. In the 10%/year example above, NPV = 88.815.175 VND (positive), so the verdict is ACCEPT. Between mutually exclusive projects, choose the highest NPV.
What discount rate should I use?
The discount rate is the minimum return you require — typically your cost of capital (WACC), a bank borrowing rate, or the return on a safer alternative; raise it for riskier projects. It is an assumption you set, not a fixed market figure — the 10%/year in this tool is only illustrative. Always test a range: for the same project, NPV is 155.719.916 VND at 8% but -53.879.327 VND at 15%.
How is NPV different from IRR?
NPV returns an amount of money (value added, in VND) at a given discount rate; IRR is the discount rate that makes NPV zero — the project's intrinsic rate of return. Use NPV to see how much value a project creates; use IRR to compare a percentage return against your cost of capital. They complement each other — FiMo has a separate IRR calculator for the other half.
Why is NPV so much smaller than the total cash received?
Because of the time value of money. Undiscounted inflows total 1.500.000.000 VND, which minus the 1.000.000.000 VND outlay looks like a 500.000.000 VND profit. But cash received later is worth less today: year 6's 250.000.000 VND is only worth 141.118.483 VND now. After discounting, the real surplus is NPV = 88.815.175 VND — the 411.184.825 VND gap is exactly the time value a simple sum ignores.
Does NPV account for inflation and taxes?
This tool does not automatically model taxes, inflation, or terminal/salvage value — it assumes equal annual inflows received at year-end and a constant discount rate. To handle inflation, either use real cash flows with a real discount rate (both net of inflation) or nominal cash flows with a nominal rate — just be consistent. Treat the output as a scenario for comparison, not a guaranteed return.