Example of Net Present Calculation

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Example of Net Present Calculation
S.SIVARAM, STUDENT, India, Member

Consider the following two investments: Investment 1 requires a cash investment of $ 10,000 today and $14,000 two years from now. One year from now this investment will yield $24,000. Investment 2 requires a cash investment of $ 6,000 today and $1,000 two years from now. One year from now this investment will yield $8,000. Calculate the NPV and find the better investment. What is your answer? (...) Read more? Sign up for free
 

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You Forgot Discount Rate
Robert Fullsome, Accountant, United States, Member

You can't solve this problem unless there is a discount rate. I could calculate IRR, but not NPV. Try again.
 

 
Net Present Value Calculation Requires Discount Rate
Jaap de Jonge, Editor, Netherlands

@Robert Fullsome: Thanks for sharing your opinion. I agree Net Present Value calculation requires applying a discount rate to compensate for the cost of capital. Without a discount rate you can not calculate the proper NPV of any investment.
 

         
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