How do I calculate NPV?
To calculate NPV, you need to subtract the initial investment from the present value of cash inflows.
What formula do I use for NPV?
The formula is NPV = ∑ (Cash inflow / (1 + r)^t) - Initial Investment, where r is the discount rate.
Can you give me an example?
Sure! If you invest $1000 and expect cash inflows of $300 for 5 years with a discount rate of 10%, the NPV would be calculated using the formula.
What if the cash inflows vary each year?
You would calculate the present value of each cash inflow separately and then sum them up before subtracting the initial investment.
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