Net Present Value Solution

STEP 0: Pre-Calculation Summary
Formula Used
Net Present Value = sum(x,1,Time Period,(Cash Flow/(1+Internal Rate of Return)^x))
NPV = sum(x,1,t,(CF/(1+IRR)^x))
This formula uses 1 Functions, 4 Variables
Functions Used
sum - Summation or sigma (∑) notation is a method used to write out a long sum in a concise way., sum(i, from, to, expr)
Variables Used
Net Present Value - Net Present Value is a method of determining the current value of all future cash flows generated by a project after accounting for the initial capital investment.
Time Period - (Measured in Year) - Time Period is the concept that a business should report the financial results of its activities over a standard time period.
Cash Flow - Cash Flow, in general, refers to payments made into or out of a business, project, or financial product.
Internal Rate of Return - Internal Rate of Return is a critical concept in capital budgeting that represents the discount rate at which the net present value (NPV) of all cash flows from a project equals zero.
STEP 1: Convert Input(s) to Base Unit
Time Period: 3 Year --> 3 Year No Conversion Required
Cash Flow: 2800 --> No Conversion Required
Internal Rate of Return: 0.3 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
NPV = sum(x,1,t,(CF/(1+IRR)^x)) --> sum(x,1,3,(2800/(1+0.3)^x))
Evaluating ... ...
NPV = 5085.11606736459
STEP 3: Convert Result to Output's Unit
5085.11606736459 --> No Conversion Required
FINAL ANSWER
5085.11606736459 5085.116 <-- Net Present Value
(Calculation completed in 00.004 seconds)

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Satyawati College (DU), New Delhi
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Net Present Value Formula

​LaTeX ​Go
Net Present Value = sum(x,1,Time Period,(Cash Flow/(1+Internal Rate of Return)^x))
NPV = sum(x,1,t,(CF/(1+IRR)^x))

What is Net Present Value?

Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project.
NPV is the result of calculations that find the current value of a future stream of payments using the proper discount rate. In general, projects with a positive NPV are worth undertaking, while those with a negative NPV are not

How to Calculate Net Present Value?

Net Present Value calculator uses Net Present Value = sum(x,1,Time Period,(Cash Flow/(1+Internal Rate of Return)^x)) to calculate the Net Present Value, The Net Present Value formula is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project. Net Present Value is denoted by NPV symbol.

How to calculate Net Present Value using this online calculator? To use this online calculator for Net Present Value, enter Time Period (t), Cash Flow (CF) & Internal Rate of Return (IRR) and hit the calculate button. Here is how the Net Present Value calculation can be explained with given input values -> 1906.919 = sum(x,1,94670856,(2800/(1+0.3)^x)).

FAQ

What is Net Present Value?
The Net Present Value formula is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project and is represented as NPV = sum(x,1,t,(CF/(1+IRR)^x)) or Net Present Value = sum(x,1,Time Period,(Cash Flow/(1+Internal Rate of Return)^x)). Time Period is the concept that a business should report the financial results of its activities over a standard time period, Cash Flow, in general, refers to payments made into or out of a business, project, or financial product & Internal Rate of Return is a critical concept in capital budgeting that represents the discount rate at which the net present value (NPV) of all cash flows from a project equals zero.
How to calculate Net Present Value?
The Net Present Value formula is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project is calculated using Net Present Value = sum(x,1,Time Period,(Cash Flow/(1+Internal Rate of Return)^x)). To calculate Net Present Value, you need Time Period (t), Cash Flow (CF) & Internal Rate of Return (IRR). With our tool, you need to enter the respective value for Time Period, Cash Flow & Internal Rate of Return and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
How many ways are there to calculate Net Present Value?
In this formula, Net Present Value uses Time Period, Cash Flow & Internal Rate of Return. We can use 1 other way(s) to calculate the same, which is/are as follows -
  • Net Present Value = sum(x,0,Number of Periods,((Cashflow at End Period/(1+Internal Rate of Return)^x)))-Initial Investment
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