How To Calculate

Learn how to calculate anything
Menu
  • bmi
Home
net
How to Calculate Net Present Value.
net

How to Calculate Net Present Value.

Rosemary Njeri

The net present value (NPV) is just one of the many ways to determine the return on investment.

The reason that NPV is often chosen as the model for financial analysts is because it evaluates the time value of money and delivers a specific comparison between initial cash outlay versus the present rate of return.

The time value of money simply means that a dollar today is of more value today than it will be tomorrow.

Although NPV is used often it has many drawbacks. The reason as to why many errors occur is because the calculations are based on educated estimations and knowing the past and current expenditures.

Formula to calculate NPV.

Calculate Net Present Value.
  • r is the discount rate.
  • i is the time period.

Example:

An investment worth $ 1,000,000 is said to bring an inflow of $ 100,000 in the first year, assuming the discounting factor is 10%, calculate the NPV.

Calculate Net Present Value.

Therefore, the NPV is $90,909.09.

Share
Tweet
Reddit
Pinterest
Email
Prev Article

Related Articles

How to Calculate Net Working Capital.
Net working capital, is the difference between a company’s current …

How to Calculate Net Working Capital.

How to Calculate Net Sales.
Net sales are total sales after subtracting discounts , returned …

How to Calculate Net Sales.

Leave a Reply Cancel Reply

Popular Posts

  • 5 Best AI Apps for Solving Complex …
    March 22, 2023 0

Categories

learntocalculate.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

How To Calculate

Learn how to calculate anything

Pages

  • About Us
  • Contact Us
  • Privacy Policy
Copyright © 2023 How To Calculate

Ad Blocker Detected

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker.

Refresh