Maths Nett Present Value NPV

Calculate net present value from annual cash flow and compound interest rate.

Net present value is often used to evaluate the relative profitability of various business options. The option with the highest net present value is generally considered to be the best option from a financial perspective. The net present value is calculated by discounting future cash flows by the compounded interest rate, or value of money.

`NPV =Σ (Ci) / (1 + R)^i, i = 0 to n `

where :

Ci = yearly cash flow
R = interest rate or cost of money
NPV = net present value
i = the year

The interest rate is assumed to be constant.

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