# Example of Net Present Calculation

 2
S.SIVARAM
STUDENT, India

Example of Net Present Calculation

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?

Rating

 1
Robert Fullsome
Accountant, United States

You Forgot Discount Rate

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

 1
Jaap de Jonge
Editor, Netherlands

Net Present Value Calculation Requires Discount Rate

@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.