Free Capital Budgeting Suite
Capital Budgeting Suite
Compare up to 3 investment projects with NPV, IRR, payback period, discounted payback, and profitability index side by side.
Like this tool? Create a free account to save your work and connect it to your books.
Evaluate investment projects with NPV, IRR, payback period, discounted payback, and profitability index — all in one tool. Compare up to 3 projects side by side with clear accept/reject recommendations. The sensitivity tab shows how all metrics change as you adjust the discount rate.
How to Evaluate a Capital Investment
- 1
Enter project details
Name your project, enter the initial investment, discount rate, and expected cash flows per period. Add a salvage value if the asset has residual worth.
- 2
Review all five metrics
NPV (dollar value created), IRR (percentage return), payback period (years to recover investment), discounted payback (same but time-value-adjusted), and profitability index (value per dollar invested).
- 3
Add projects to compare
Click "Add Project" to evaluate up to 3 investments side by side. The comparison table highlights the winner for each metric.
- 4
Test sensitivity
Adjust the discount rate slider to see how all metrics change for all projects simultaneously. Find where accept/reject decisions flip.
Why Capital Budgeting Matters
Make better big decisions
Buying equipment, opening a location, hiring a team — these decisions commit capital for years. Capital budgeting tools turn gut feelings into data-backed decisions with clear accept/reject criteria.
Compare apples to oranges
Different investments have different timelines, cash flows, and risk profiles. The five-metric approach lets you compare them fairly — NPV for absolute value, IRR for return rate, payback for risk, PI for efficiency.
Side-by-side project comparison
When you have 3 options and budget for 1, you need a comparison framework. This tool highlights the winner for each metric and provides a recommendation that accounts for all five.
Sensitivity reveals risk
A project with great NPV at 10% discount rate might be terrible at 15%. The sensitivity slider shows exactly where each project's metrics turn from accept to reject — that's your risk threshold.
Frequently Asked Questions
Which metric should I use — NPV, IRR, or payback?
Use all three together. NPV is the gold standard for value creation. IRR tells you the return rate for comparison to your cost of capital. Payback period measures how quickly you recover your investment (risk metric). If they disagree, NPV usually wins because it accounts for scale and reinvestment properly.
What is the profitability index?
Profitability Index = (NPV / Initial Investment) + 1. A PI above 1.0 means the project creates value. It's useful when comparing projects of different sizes — a $10K project with PI of 1.5 creates more value per dollar invested than a $100K project with PI of 1.1.
What is discounted payback period?
Regular payback period ignores the time value of money. Discounted payback uses present values of each cash flow, so it tells you when you recover your investment in today's dollars. It's always longer than simple payback and gives a more conservative (realistic) answer.
When should I reject a project?
Reject when NPV is negative, IRR is below your cost of capital, or payback period exceeds your risk tolerance. If multiple metrics disagree, investigate why — it often reveals assumptions about cash flow timing or reinvestment rates that need scrutiny.
Like this tool? Create a free account to save your work.
Your data saves across all 41 tools. Enter your business info once — it's in every invoice, every report, every receipt. Free forever, no credit card.
Create Free Account →