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Net Present Value Formula

GoInternal Rate of Return Formula

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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. Check FAQs

NPV = \sum (x, 1, t, (\frac{CF}{{(1 + IRR)}^{x}}))

NPV - Net Present Value?t - Time Period?CF - Cash Flow?IRR - Internal Rate of Return?

Net Present Value Example

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With units

Only example

Here is how the Net Present Value equation looks like with Values.

Here is how the Net Present Value equation looks like with Units.

Here is how the Net Present Value equation looks like.

5085.1161 = \sum (x, 1, 3, (\frac{2800}{{(1 + 0.3)}^{x}}))

5085.1161 = \sum (x, 1, 3Year, (\frac{2800}{{(1 + 0.3)}^{x}}))

5085.1161 = \sum (x, 1, 3, (\frac{2800}{{(1 + 0.3)}^{x}}))

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Net Present Value Solution

Follow our step by step solution on how to calculate Net Present Value?

FIRST Step Consider the formula

NPV = \sum (x, 1, t, (\frac{CF}{{(1 + IRR)}^{x}}))

Next Step Substitute values of Variables

∴

NPV = \sum (x, 1, 3Year, (\frac{2800}{{(1 + 0.3)}^{x}}))

Next Step Prepare to Evaluate

∴

NPV = \sum (x, 1, 3, (\frac{2800}{{(1 + 0.3)}^{x}}))

Next Step Evaluate

∴

NPV = 5085.11606736459

LAST Step Rounding Answer

∴

NPV = 5085.1161

Net Present Value Formula Elements

Variables

Functions

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.

Symbol: NPV

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Net Present Value

Time Period

Time Period is the concept that a business should report the financial results of its activities over a standard time period.

Symbol: t

Measurement: TimeUnit: Year

Note: Value should be greater than 0.

Formulas to find Time Period

Cash Flow

Cash Flow, in general, refers to payments made into or out of a business, project, or financial product.

Symbol: CF

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Cash Flow

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.

Symbol: IRR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Internal Rate of Return

sum

Summation or sigma (∑) notation is a method used to write out a long sum in a concise way.

Syntax: sum(i, from, to, expr)

Other Formulas to find Net Present Value

Go Internal Rate of Return

NPV = \sum (x, 0, n, ((\frac{CF n}{{(1 + IRR)}^{x}}))) - IIT

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Go Shareholders' Equity given Total Assets and Liabilities

TSE = TA - TL

Go Shareholders' Equity given Share Capital, Retained Earnings and Treasury Shares

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How to Evaluate Net Present Value?

Net Present Value evaluator uses Net Present Value = sum(x,1,Time Period,(Cash Flow/(1+Internal Rate of Return)^x)) to evaluate 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 evaluate Net Present Value using this online evaluator? To use this online evaluator for Net Present Value, enter Time Period (t), Cash Flow (CF) & Internal Rate of Return (IRR) and hit the calculate button.

FAQs on Net Present Value

What is the formula to find Net Present Value?

The formula of Net Present Value is expressed as Net Present Value = sum(x,1,Time Period,(Cash Flow/(1+Internal Rate of Return)^x)). Here is an example- 1906.919 = sum(x,1,94670856,(2800/(1+0.3)^x)).

How to calculate Net Present Value?

With Time Period (t), Cash Flow (CF) & Internal Rate of Return (IRR) we can find Net Present Value using the formula - Net Present Value = sum(x,1,Time Period,(Cash Flow/(1+Internal Rate of Return)^x)). This formula also uses Summation Notation (sum) function(s).

What are the other ways to Calculate Net Present Value?

Here are the different ways to Calculate Net Present Value-

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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Net Present Value Formula

​GoInternal Rate of Return Formula

Net Present Value Example

Net Present Value Solution

Net Present Value Formula Elements

Other Formulas to find Net Present Value

Other formulas in Basics of Financial Accounting category

How to Evaluate Net Present Value?

FAQs on Net Present Value

Variable Name

GoInternal Rate of Return Formula