ansaurus

Question

How to calculate NPV

Answer 1

+1 A:

You would calculate the NPV of each year using the following formula: (value) / ((1 + 0.15) ^ (year)) then sum all the results to get your final NPV - where ^ means to the power of.

So for year two it would be: 122000 / ((1.15)^ 2).

At the current point in time the power ^ value would be 0

saret 2010-01-08 12:24:34

Yes that i am doing, but not getting the right answer.My answer is 416971.03..

Avinash 2010-01-08 12:59:53

Can you edit your original post to include the code - seems like there is an issue in the algorithm - what value do you calculate for the year 1 entry? - It is also possible that some rounding issue might be occuring in the calculation

saret 2010-01-08 13:12:42

i have not created any code for this yet, i am just testing it on paper for now.I am taking 0 as a first year value. will it be a problem?

Avinash 2010-01-08 14:02:07

0 means the current point in time - not a year from now, so $1 received now would be worth $1 at this point in time, there is no change in what that $1 would be worth if received now

saret 2010-01-08 14:06:24

i am not getting that what are u trying to say,Can you please become some more descriptive??

Avinash 2010-01-08 14:12:22

Sorry by 0 do you mean the value used as the power or do you mean the amount received at that point in time (the numerator in equation)? - the previous comment assumed you were talking about the power of value

saret 2010-01-08 14:14:34

Can you post the equation you are using (even if on paper) - will be easier to detect what is going wrong with your result then

saret 2010-01-08 14:51:29

hi, i have added the formula which i am using to the question....

Avinash 2010-01-09 04:05:41

Sorry for late reply, been away.So was your final formula this?:=(110000/(1.15)^1) + (122000/(1.15)^2) + (135200/(1.15)^3) + (149720/(1.15)^4) + (157706/(1.15)^5) + (166091/(1.15)^6)You can pop this equation into excel (or some expression evaluator) to see what the result should be

saret 2010-01-12 08:54:15

ansaurus

tags:

views:

answers:

How to calculate NPV

related questions