A worked example: ₹5L investment, ₹1.5L/year for 5 years, 10% discount rate
A ₹5,00,000 investment returning ₹1,50,000 a year for 5 years, discounted at 10%, has an NPV of ₹68,618.02 — positive, meaning the investment is expected to exceed a 10% return.
The formula: NPV = −initial investment + Σ cash flow ÷ (1+r)^t
Each year's cash flow is discounted back to today's value individually (year 1's flow divided by (1+r)¹, year 2's by (1+r)², and so on), then all the discounted values are summed and the initial investment is subtracted.
The same investment, a higher discount rate: 18% instead of 10%
That same ₹5,00,000 investment and cash flows, discounted at 18% instead, gives an NPV of −₹30,924.35 — now negative. A higher discount rate (a higher required return) makes the same future cash flows worth less today, and this particular investment no longer clears that higher bar.
Why the discount rate choice can flip the entire conclusion
The exact same investment can look profitable at one discount rate and unprofitable at another — the discount rate represents the return being compared against (cost of capital, or an alternative investment's expected return), so choosing it thoughtfully matters as much as the cash flow projections themselves.
What a zero NPV would represent
An NPV of exactly zero means the investment returns precisely the discount rate — neither better nor worse. The specific discount rate that makes NPV exactly zero for a given set of cash flows has its own name: the internal rate of return (IRR).