This **NPV calculator** calculates the net present value of an investment by taking account of its initial cost, discount rate and the sum of all positive and negative cash flows. There is more on this topic below the form.

## How does this NPV calculator work?

This financial tool can help investors assess an investment opportunity in terms of profitability by measuring its its Net Present Value which is an important indicator.

The algorithm of this *NPV calculator* applies the net present value formula which is detailed below:

- Long form of the NPV formula:

- Short form of the Net present value equation:

Where:

**C0** is the initial cost of the investment.

**C1 … Ct** are the projected positive and/or negative cash flows within the period of time given.

**r** is the discount rate in the form of a percent.

**t** is the time frame the expected is placed.

The results displayed by this calculator consist of the NPV value and of the present value of the assumed cash flows which is obtained as the sum between the initial cost of the investment and the NPV figure.

As it can easily be observed this application is a very flexible one since it can handle as many cash flows as required depending on the investment projected life time. To do so you just have to click the "ADD 1 YEAR CASH FLOW" button.

## Example of a NPV calculation

Let’s discover the net present value of an investment that is expected to cost in implementation $100,000, while the discount rate if 7.5% and there are 10 cash flow over the next 10 years as presented below:

Discount rate 7.5% | |||

Investment term 10 years | |||

Year | Cash Flow | Present Value | Cumulative |

Initial cost | -$100,000.00 | -$100,000.00 | -$100,000.00 |

1 | $13,000.00 | $12,093.02 | -$87,906.98 |

2 | $14,000.00 | $12,114.66 | -$75,792.32 |

3 | $15,000.00 | $12,074.41 | -$63,717.91 |

4 | $18,000.00 | $13,478.41 | -$50,239.50 |

5 | $19,500.00 | $13,582.89 | -$36,656.61 |

6 | $21,000.00 | $13,607.19 | -$23,049.42 |

7 | $25,500.00 | $15,370.25 | -$7,679.17 |

8 | $19,000.00 | $10,653.34 | $2,974.18 |

9 | $20,000.00 | $10,431.67 | $13,405.84 |

10 | $16,000.00 | $7,763.10 | $21,168.95 |

NPV | $21,168.95 | ||

PV of cash flow | $121,168.95 |

06 Apr, 2015 | 0 comments

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