Finance & Investment · Returns
Cost-Benefit Ratio Calculator
Compare a project's benefits with its costs in today's money: the benefit–cost ratio, net present value and payback, from yearly costs and benefits.
A ready-made version of the IRR & NPV Calculator.Also listed inBusiness
Your inputs
Quick start — try a typical case
Money spent as negative, money received as positive. The first row is today (not discounted).
Your required return or cost of capital.
Your result Live
Benefit–Cost Ratio — Benefits Exceed Costs
1.07 : 1
₹10,67,255 of discounted benefits for ₹10,00,000 of discounted costs
- Net Present Value
- ₹67,255
- IRR (per year)
- 12.64%
- Modified IRR (per year)
- 10.54%
- Payback Period
- 3.33 years
- Discounted Payback
- 4.46 years
- Undiscounted Net Cash
- ₹4,00,000
Discounted cash flows
6 rowsNPV treats the first row as today. Excel's NPV() discounts the first value too; use =NPV(rate, later flows) + first flow to match.
How this is calculated
NPV = Σ CFₜ ÷ (1 + r)ᵗ · IRR: the r where NPV = 0 · PI = PV(inflows) ÷ PV(outflows)
- r
- Discount rate per period (the yearly rate converted to the row period)
- MIRR
- (FV of inflows at the reinvestment rate ÷ PV of outflows)^(1/n) − 1
NPV discounts every future cash flow to today's value at your required return and adds them up: a positive NPV means the investment earns more than that return. IRR is the return at which NPV is exactly zero. When cash flows change sign more than once, IRR can be misleading, so the calculator also shows MIRR, which assumes a realistic reinvestment rate.
Assumptions & sources
- Cash flows occur at the end of each period; the first row is today.
- The yearly discount rate is converted to the row period by compounding (e.g. monthly = (1 + r)^(1/12) − 1).
- For dated, irregular cash flows use the XIRR Calculator.
- 1Excel financial functions (FV, PV, PMT, NPER, RATE, NPV, IRR, XIRR) — the convention spreadsheets and banks use — Microsoft Support
- 2CFA Program Curriculum — Quantitative Methods: The Time Value of Money — CFA Institute
- 3Investments (Bodie, Kane & Marcus), chapters on returns, compounding and the time value of money — McGraw-Hill
Calculator ID FIN-RET-IRRNPV-001/cost-benefit · version 1.0.0
Common questions
What is a good benefit–cost ratio?
Above 1.0 means the discounted benefits exceed the discounted costs. Public projects are often required to clear a set threshold, such as 1.2 or 1.5.
Why discount future benefits?
Money later is worth less than money now, because it could have been invested meanwhile. Discounting puts all costs and benefits in today's money before comparing them.