Example of NPV calculation
Posted: Sun Dec 22, 2024 7:19 am
For clarity, let's look at an example of calculating NPV for this project:
The initial investment amount is RUB 15,000 thousand.
The projected annual income how to add taiwan number on whatsapp for 5 years is 5,000 thousand rubles.
The discount rate is 17%.
Now let's calculate the NPV of the investment project:
NPV = 5000/1.17 + 5000/1.172 + 5000/1.173 + 5000/1.174 + 5000/1.175 – 15,000 = 15,996.73 – 15,000 = 996.73 thousand rubles.
Since the calculated NPV value is positive, the project can be accepted for practical implementation.
Investment conditions during project implementation may vary. Let us give an example of calculating the net present effect (income) when funds are invested once, and annual income from the investment project varies. Let us assume that the investment volume is 12,500 thousand rubles. The project implementation period is 5 years, and the discount rate is 12.5% per annum. Income by year from the implementation of the investment project is as follows (in thousands of rubles): 2500; 2250; 1980; 1850; 1720.
Let's calculate the net present value:
NPV = 2500*1.125-1 + 2250*1.125-2 + 1980*1.125-3 + 1850*1.125-4 + 1720*1.125-5 – 12,500 = -4999.96.
The value of the indicator under consideration is negative. Consequently, the project under these conditions does not bring profit and it would be inappropriate to start implementing it.
Now let's give an example of calculating NPV in a situation where income from invested resources begins to arrive after the project is completed. In this case, the cash flow includes both positive and negative values.
Let's assume that the investment project's cash flow indicators are as follows (in thousands of rubles): -215; -295; 50; 500; 300; 800; 1000. The capitalization rate is 14% per annum. Now let's calculate the net present value:
NPV = (-215)*1.14-1 + (-295) *1.14-2 + 50*1.14-3 + 500*1.14-4 + 300*1.14-5 + 800* 1.14-6 + 1000*1.14-7 = 834.12.
The NPV value is positive. This indicates the feasibility of implementing this project.
The initial investment amount is RUB 15,000 thousand.
The projected annual income how to add taiwan number on whatsapp for 5 years is 5,000 thousand rubles.
The discount rate is 17%.
Now let's calculate the NPV of the investment project:
NPV = 5000/1.17 + 5000/1.172 + 5000/1.173 + 5000/1.174 + 5000/1.175 – 15,000 = 15,996.73 – 15,000 = 996.73 thousand rubles.
Since the calculated NPV value is positive, the project can be accepted for practical implementation.
Investment conditions during project implementation may vary. Let us give an example of calculating the net present effect (income) when funds are invested once, and annual income from the investment project varies. Let us assume that the investment volume is 12,500 thousand rubles. The project implementation period is 5 years, and the discount rate is 12.5% per annum. Income by year from the implementation of the investment project is as follows (in thousands of rubles): 2500; 2250; 1980; 1850; 1720.
Let's calculate the net present value:
NPV = 2500*1.125-1 + 2250*1.125-2 + 1980*1.125-3 + 1850*1.125-4 + 1720*1.125-5 – 12,500 = -4999.96.
The value of the indicator under consideration is negative. Consequently, the project under these conditions does not bring profit and it would be inappropriate to start implementing it.
Now let's give an example of calculating NPV in a situation where income from invested resources begins to arrive after the project is completed. In this case, the cash flow includes both positive and negative values.
Let's assume that the investment project's cash flow indicators are as follows (in thousands of rubles): -215; -295; 50; 500; 300; 800; 1000. The capitalization rate is 14% per annum. Now let's calculate the net present value:
NPV = (-215)*1.14-1 + (-295) *1.14-2 + 50*1.14-3 + 500*1.14-4 + 300*1.14-5 + 800* 1.14-6 + 1000*1.14-7 = 834.12.
The NPV value is positive. This indicates the feasibility of implementing this project.