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    Katpat5's Avatar
    Katpat5 Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Jun 30, 2008, 07:15 PM
    how to calculate the net present value
    You have the opportunity to invest in a machine that costs $340,000. The machine generates revenue of $100,000 at the end of each year and requires maintenance costs of $10,000 at the end of each year. The economic life of the machine is five years and the relevant discount rate is 9 perecent.
    Criado's Avatar
    Criado Posts: 142, Reputation: 15
    Junior Member
    		  
    #2

    Jul 2, 2008, 08:42 AM
    Add up the following:

    Inflow Year 1 x PV Factor for Year 1 @ 9%
    Inflow Year 2 x PV Factor for Year 2 @ 9%
    Inflow Year 3 x PV Factor for Year 3 @ 9%
    Inflow Year 4 x PV Factor for Year 4 @ 9%
    Inflow Year 5 x PV Factor for Year 5 @ 9%

    Then, deduct the initial investment.
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member
    		  
    #3

    Jul 2, 2008, 05:40 PM
    Or, since it's a series of equal payments, just find the present value of an annuity in one step. (same rate, same number of years.)
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