Example of Net Present Calculation


 
Net Present Value (NPV) > Forum Log in

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

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?
 

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

 







 

  Do you wish to study further? You can learn more from the summary, forum, discussions, lessons, courses, training, instructions, expert tips, best practices and education sources. Register.  


Special Interest Group Leader

You here


More on Net Present Value (NPV)
Summary
Forum
Best Practices

Expert Tips

Resources

About 12manage | Advertising | Link to us | Privacy | Terms of Service
Copyright 2017 12manage - The Executive Fast Track. V14.1 - Last updated: 22-9-2017. All names tm by their owners.