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-   -   Calculation of net present value (https://www.askmehelpdesk.com/showthread.php?t=332806)

  • Mar 23, 2009, 10:33 AM
    Sands600461
    Calculation of net present value
    How do I calculate the NPV of a company project
  • Mar 24, 2009, 03:49 AM
    ROLCAM

    You calculate the NET PRESENT VALUE
    by matching the outflow at the beginning with all the returns discounted to the present.
    An interest rate has to be assumed.

    Example:-

    Purchase of Equipment = 20,000

    Returns over the next five years.

    Year 1 5,000
    Year 2 5,000
    Year 3 5,000
    Year 4 5,000
    Year 5 5,000

    You calculate the present value of the above
    5 lots of 5,000, say at 10% Cost of Capital.

    You total the 5 calculations and subtract the
    original 20,000.

    This is a technique in Capital Budgeting decisions as to the choice of alternative
    capital investments.

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