Financial Analysis of an Investment Project

Use this calculator to check if your dream project is profitable and financially makes sense .

This tool helps answer :

  1. How do I evaluate the financials of my dream project? Is it worth it to attain a college or get an advanced degree for a potential salary increase, or is it lucrative to build my own business for a better financial outlook?

  2. Should I borrow money from a bank or others or use my own money to fund the project?

  3. What will the financials look like? What is the NPV, profitability index, and breakeven year? Should I pursue this project after considering those costs and benefits?

Cash Flows

info Benefit example: salary increased (compared with current salary), business income generated from this project.
Cost example: tuition, training cost, initial and ongoing operating expense of business, the lost income in current job, if any, due to the "time" (not "money") spent on achieving this project (for example, 4-year lost time due to full-time enrollment in college).
Note: Do not include cash flow from financing activitiy, such as the fund received (from the bank, sponsor, or your own fund), and the payment for the loan or interest. The financing activitiy will be considered implicitly when you fill in "Fund Source" section so you should ignore these cash flows here.

Benefit

Cost

Up-front
1st-year
2nd-year
3rd-year
4th-year
5th-year
Further every year
, with growth rate
, until the end of th-year.
Present value

Fund Source

Amount

Interest rate
Bank loan
Sponsor
The yield expected from your sponsor, 7 ~ 10% is normally considered fair assumption if your sponsor does not ask for fixed percentage of return.
Own fund
The yield to expect if you use your money alternatively, such as investing in stock market or real estate. 7 ~ 10% is normally considered fair assumption.

Summary

Total cost
Cost of capital Weighted average interest rate of fund source
Net present value (NPV) =present value of benefit - present value of cost.
NPV > 0 means this project is financially valuable to pursue. The higher the number, the more monetary value you can earn through this project. However, risks (the uncertainty of cost and benefit) should also be considered cautiously.
Profitability index (PI) PI > 1 means this project is financially valuable to pursue. The higher the better. However, risks (the uncertainty of cost and benefit) should be considered cautiously.
Breakeven at the th year

Cash Inflow and Outflow Over Time

Index

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Content created by

Alex LiuCFA, FSA, FRM, MBA

Alex is a seasoned finance professional with over 15 years of experience in investment management, consulting, and financial technology. He began his career as a financial advisor and later led large-scale budgeting and risk management initiatives as an actuary and manager at KPMG and global insurance firms. He also brings extensive experience as both an investment analyst and a software engineer. Alex is a CFA® charterholder, Fellow of the Society of Actuaries (FSA), and Financial Risk Manager (FRM®). He holds an MBA from the Simon Business School at the University of Rochester.

Content created on 2023-06-01. Last modified and reviewed on 2025-10-12.