Scribd
Upload
75 views

Time Series Cash Flows Present Values

NPV and IRR are methods for calculating the value of cash flows over time. NPV discounts future cash flows to determine the present value, taking into account the time of cash flows, discount rate, and net cash flow. For a project with profits of £55 million in 10 years, NPV calculates the current value as £46 million. IRR identifies the interest rate where an investment has a net present value of zero and was calculated to be approximately 12% for a project with an NPV of £46 million and terminal value of £85,000.

Uploaded by

Mohamed Abdulla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
75 views

Time Series Cash Flows Present Values

NPV and IRR are methods for calculating the value of cash flows over time. NPV discounts future cash flows to determine the present value, taking into account the time of cash flows, discount rate, and net cash flow. For a project with profits of £55 million in 10 years, NPV calculates the current value as £46 million. IRR identifies the interest rate where an investment has a net present value of zero and was calculated to be approximately 12% for a project with an NPV of £46 million and terminal value of £85,000.

Uploaded by

Mohamed Abdulla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

NPV and IRR calculation:

NPV:

The net present value (NPV) or net present worth (NPW)[1] of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values(PVs) of the individual cash flows of the same entity.

The net present value takes into account the incoming and outgoing of the company, by using the following formula we discount our future profits to get a realistic figure of what they are worth currently

the time of the cash flow

Discount rate

Net cash flow

Using an excel calculator we calculated that for a profit of 55 million expected after 10 years, it is currently worth 46 million.

IRR

Is the rate of return used in capital budgeting returned on investment to shareholders.

Using an NPV of 46 million and a terminal value of 85,000 a goal seek function was used to identify R and returned a value of approximately

12%

You might also like