NPV?
..................................... ......................................................................
Trending Content - Off Topic Forum
| +59 | Girlfriend found my UBS badge. I told her I was cheating. | 5 | 2d |
| +43 | Quit at 25? | 8 | 1d |
| +25 | What portable monitors are you guys actually using and would recommend? | 5 | 1d |
| +17 | Jensen Huang resignation | 17 | 5h |
| +12 | Anyone still having issues with Microsoft Outlook? | 2 | 2d |
| +6 | Honeymoon Length | 6 | 5d |
| +5 | I want to work for Google | 1 | 2d |
| +3 | Jam Band Debate | 1 | 1d |
| +3 | This site is now completely overrun with AI bots | 1 | 3h |
Career Resources
By table, I'm guessing you're referring to the discount rates?
As you know, NPV = (Sum of (cashflows year t) * (discount rate year t) from year t = 1 to N ) + Initial investment
The discount rates are 1 / (1 + discount rate )^t
The table is just a look-up table for those discount rates. On one axis you have years/time periods, on the other discount rate.
Let's say you have the following data:
Initial investment = -20
CF(t=1) = 10
CF(t=2) = 20
CF(t=3) = 30
And with different discount rates
r(t=1,2,3) = 5%
Your NPV is then
NPV = CF(t=1) x r(t=1)+CF(t=2) x r(t=2)+CF(t=3) x r(t=3)-Investment
From the lookup table (https://image.slidesharecdn.com/npvtable-140826205336-phpapp02/95/npv-t…</a">for example this link) you find the following:
Period 1, Discount Rate 5% : 0.9524
Period 2, DR 5% : 0.9070
Period 3, DR 5%: 0.8638
Ok, now you can insert all the data into your NPV equation
NPV = CF(t=1) x r(t=1)+CF(t=2) x r(t=2)+CF(t=3) x r(t=3)-Investment NPV = (10)x(0.9524)+(20)x(0.9070)+(30)x(0.8638)-20 = 33.575
If the yearly rates are different (year 1, i = 5%, year 2, i =3%, etc.), you simply multiply the discount rates, instead of using the table.
i.e
CF(1) * 1/(1+r1) + CF(2) * 1/((1+r1)(1+r2)) + ... + CF(N) * 1/((1+r1)(1+r2)...(1+rN))
.
Could you provide visual examples of your problem? Having a real hard time figuring out what you're trying to say.
NPV is a sum of PV future cash flows, so that NPV = PV(CF1) + PV(CF2) + PV(CF3), nothing more to it than that.
To find PV of any future CF, you simply divide/multiply by the appropriate discount rates. If the rate is fixed, you the formula is PV = FV/(1+r)^n, if the rate is not fixed, you need to divide by every previous rate (1+r_1)(1+r_2)...(1+r_n), up to your future year / period n.
Qui quibusdam accusamus voluptate. Aut eligendi amet qui deleniti magnam dolore et. Eos suscipit aut est omnis quo.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...