NPV or the net present value shows the difference between the present value of future cash flows and the current investment. The following formula demonstrates how NPV and IRR are related: NPV(IRR(A2:A7),A2:A7) equals 1. The Net Amount is: Net Present Value = $518. For example, this will calculate the present value of the cash flows in cell range C2 to C5, where 0. In the formula, cells C5, C6 and C7 refer to Future Cash Flow, Present Value and Number of Years successively. Net Present Value atau NPV adalah selisih antara nilai sekarang dari arus kas yang masuk dengan nilai sekarang dari arus kas yang keluar pada periode waktu tertentu. These discount factors would always be provided in an exam question if needed. 1 t = 200 0. While you can choose to use this formula, many financial professionals use Excel instead to perform this function without doing the math themselves. When the NPV is positive, an investment's expected. or. . Depreciation is calculated based. Unlike the variable NPV cash flow values, PV cash flows must be constant throughout the investment. NPV calculation formula : For calculating NPV value using formula, you must already know the estimated value of discount rate (r) , all cash flow (both positive and negative) and the total initial invesment made by the company. 1 — Internal Rate of ReturnModified 5 years, 3 months ago. In this formula, i represents the required return or discount rate for the investment while t equals the number of time. For example, as shown in Figure 2 (and worksheet “XNPV”) the formula =XNPV (B2,C5:C7,B5:B7) computes the NPV of the cash flows (-$80. The net present value ("NPV") method uses an important concept in investment appraisal – discounted cash flows. Disadvantages of Using Net Present Value. ) ln (1 + discount rate) The following is an example of determining discounted payback period using the same example as used for determining payback period. The net present value formula is the sum of cash flows (CF) for each period (n) in the holding period (N), discounted at the investor’s required rate of return (r): The NPV formula calculates the present value of all cash inflows and the present value of all cash outflows. e. First, you are asked to enter the discount rate, so you might refer directly to cell C4 (6%). Value 1 = -$100,000. The first payment is optional and corresponds to a cost or payment that occurs at the beginning of the investment. A Refresher on Net Present Value. This cancels out many of these throughout the formula, which leaves. By utilizing Excel's built-in functions, users can calculate NPV in a user-friendly manner, considering factors such as cash flows, discount rates, risk, and inflation. Annuity due refers to payments that occur regularly at the beginning of each period. Check out our blog post to learn more about how to use the NPV formula in Google Sheets. , bring to the present value) the net cash flows that will occur during each year of the project. Investment Appraisal - Calculating Net Present Value. you could plug this into the NPV formula. =NPV (0. n = The number of periods. PV = Present value, also known as present discounted value, is the value on a given date of a payment. Formula For the Net Present Value is given below: NPV = ∑ (CFn / (1 + i)n) – Initial Investment. Where To Find The NPV Function? Option 1: You can find the NPV function in the Formulas tab of Excel under Financial. e. This implies that if cash flows occur at the beginning of a. $50 in 2 years is worth 37. A. Sample Usage. n= life of the project. The discount rate to apply to the cash flows. Accept – Reject Criteria: If the NPV is positive, the project is accepted. Project 2 is not profitable for the company, as it has a negative NPV. But your choice of interest rate can change things! If you use our NPV calculator to determine the NPV for each of these projects, you will discover that the NPV of project 1 is equal to $481. 08,200,250,300) NPV (A2,A3,A4,A5) Syntax NPV (discount, cashflow1, What is the Internal Rate of Return (IRR)? The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of a project zero. We have used the NPV formula and we have ignored the value in cell C2, as this is the initial outflow. In the NPV formula, you must input the rate, which is the discount rate. The NPV formula is the present value of expected cash flows minus the current value of invested cash. Keep in mind that money is always worth more today than in the future. Accounting rate of return divides the. 3 million. . The discount rate for the investment is 5% and the time period for the investment is five years. Explanation: a net present value of 0 indicates that the project generates a rate of return. As you can see, we also provide the internal rate of return (IRR) in. If only a nominal interest rate (rate per annum or rate per year) is known, you can calculate the discount rate using the following formula:Black Scholes Model: The Black Scholes model, also known as the Black-Scholes-Merton model, is a model of price variation over time of financial instruments such as stocks that can, among other. Launch the WPS Excel/Spreadsheet file. Net Present Value (NPV) merupakan selisih antara nilai sekarang arus kas masuk dan arus kas keluar selama periode tertentu. Leave-Sharing Plan: A plan that allows employees to donate unused sick-leave time to a charitable pool, from which employees who need more sick leave than they are normally allotted may draw. 18. primero es usar la fórmula básica, calcular el valor presente de cada componente para cada año individualmente y luego sumarlos todos juntos. =XNPV (rate, values, dates) rate: The discount rate applied to the series of cash flows. Step 1 – Decide on (or calculate) a discount rate. Identify the cash inflows and outflows associated with the investment or. For information about annuities and financial functions, see PV. You would find quickly that the IRR for the building only reaches 11. The above NPV calculation of -$44,845 incorrectly includes the $515,000 initial cash outlay in the series of cash flows. Buffett is an investor, business magnate, and philanthropist. The XNPV function in Microsoft Excel to calculate NPV given three key inputs of a discount rate, money values and corresponding dates. 4 Inserting Present Cash Flows Using Excel ($ except Cost of. You'd then subtract the cash flows of the bond used to fund the project. NPV is the present value (PV) of all the cash flows (with inflows being positive cash flows and outflows being negative), which means that the NPV can be considered a formula. Let’s look at the example below to see how to use NPV function in Google Sheets. This will calculate and provide us with the present value of these uneven cash flows, i. To calculate and find out whether an investment is positive in the future, use NPV. dates: The specific dates on which the series of cash flows occur. Explaining The NPV Formula in More Detail. Hit go and double-click on NPV: Step 3: Input the right figures. Profitability Index: The profitability index is an index that attempts to identify the relationship between the costs and benefits of a proposed project through the use of a ratio calculated as:NPV is used to measure the costs and benefits, and ultimately the profitability, of a prospective investment over time. The syntax of the PV function is as follows: =PV (rate,nper,pmt, [fv], [type]) The fv and type arguments are optional arguments in the function (indicated by the square brackets). NPV = Cash flow / (1 + i)^t – initial investment. The equation for calculating net present value is as follows:Net present value (NPV) is a calculation that takes a future stream of cash flows and discounts them back into the present day. where: PVPV – Present value of money; cash flowcash flow – Amount of money you will get in the future; rr – Discount rate (interest rate used in cash flow analysis); and. Using the TI-84 Plus CE calculator, one can easily calculate the NPV by inputting these values. 3. Net Present Value. In this formula, it is assumed that the net cash flows are the same for each period. Net present value (NPV) is the amount of money you get when you subtract the present value of cash inflows from the present value of cash outflows over time. The Net present value formula determines the total present value of a project's cash flows, including the return on the initial investment. values: The series of cash flows from the investment. PV Formula in Excel. Value 1 = -$100,000. It happens two times at year 0 and the end of year 5. NPV Formula. #2 – Cannot be. NPV = [cash flow / (1+i)^t] - initial investment. r = rate of return (also known as the hurdle rate or discount rate) n = number of periods. Initial value refers to the original value at the time of investing. 81 right now. By contrast, the internal rate of return (IRR) is. NPV analysis is a form of intrinsic valuation and is used extensively across finance and accounting for determining the value of a business, investment security, capital project, new venture, cost reduction program, and anything that involves cash flow. How to Calculate Net Present Value (NPV) in Google Sheets. Try it! If you need to use an equation, add or write it in Word. ; This formula doesn’t consider the time frame. In order determine this, add the present values for all the investment period’s time intervals and then subtract the investment sum. These three possibilities of NPV metric are briefly explained below:. Step 2: Establish a series of cash flows (must be in consecutive cells). NPV = Cash flow / (1 + i)^t – initial investment. The formula for Net Present Value is: where: Z 1 = Cash flow in time 1. The difference between the (PV) and (NPV) functions is that the (PV) function assumes that you have the same profits in each period (as in our example above), while the (NPV) function does not make this assumption. It is the sum of present values of money in different future points in time. NPV = C imes dfrac {1- (1+r)^ {-n}} {r} - Initial: Investment NPV = C× r1−(1+r)−n −InitialInvestment. A series of cash flows that corresponds to a schedule of payments in dates. try this instead: 100 100 2600 NPV(. 76 discount factor = £45,600. Follow the steps below: Firstly, insert this formula in cell C11 to calculate the Total amount of equity and debt. The aim of this article is to help provide an understanding of sensitivity, specificity, positive predictive value (PPV) and negative predictive value (NPV) in an intuitive and comprehensible format. See Present Value Cash Flows Calculator for related formulas and calculations. Option 3: You can manually type. The net present value analysis is used to assess the value of an investment, a project, or any sequence of cash flows. . Menu. Instead, the “NPV” function is used in a spreadsheet program. Key Takeaways. Year 2: £50,000 X 0. The £1. This result means that project 1 is profitable because it has a positive NPV. I am trying to calculate the net present value (NPV), internal rate of return (IRR) and the payback (PB) time for a varying number of projects in order to evaluate, which investment project offers the best return. In other words, it’s used to evaluate the amount of money that an investment will generate compared with the cost adjusted. Unlike net present value, the internal rate of return doesn’t give you the return on the initial investment in terms of real dollars. The syntax is as follows:The main difference between the NPV and the XNPV functions is that the values input in the NPV function are equally spaced in terms of time period, whereas the values input in the XNPV function are not equally spaced. NPV biasa digunakan dalam penganggaran modal untuk menganalisis profitabilitas dari sebuah proyek. Tweet. The user would need to add, P = net period cash flow. 2. Here's the formula to use to calculate WACC: Weighted average cost of capital = (percentage of capital that is equity x cost of equity) + [(percentage of capital that is debt x cost of debt) x (1 - tax rate)]NPV calculation formula : For calculating NPV value using formula, you must already know the estimated value of discount rate (r) , all cash flow (both positive and negative) and the total initial invesment made by the company. Internal Rate of Return - IRR: Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments. Please take a look at the. Here is an example of how to use the Net Present Value (NPV) function in Excel. First, the NPV method uses the time value of money concept. This formula describes the difference between the project’s cash value now and in the future. Example. XNPV (rate, values, dates) The XNPV function syntax has the following arguments: Rate Required. The Purpose of the Internal Rate of Return . In January 2022, an expert committee appointed by the Supreme Court of India filed a report criticising how the Indian government measures the value of the country’s forests – the Net Present Value (NPV). (In other words it is $18. In our example, we obtain a net present value of 1086. The sum of all these discounted. The above step is simultaneously applied in cell “ C12 ” also. IRR is closely related to NPV, the net present value function. DC3= $42,074. This is the approach taken in the example shown, where the formula in F6 is: The NPV function returns 50962. STEP 4: Use Goal Seek Tool for. The array of values and dates must be equal in length since the purpose of. The profitability index rule states: If the profitability. This will give you a result of $11,657. $25 in 1 year is worth $21. The NPV function assumes each cell value is the money recieved at the end of its own year. e. Knowing the net present value can help calculate the return on investment for a particular investment. It is the present value of future cash flows compared with the initial investments. On the Formulas tab, in the Function Library group, click the Financial button. In this lesson, we go through an example of how to calculate the Net Present Value (NPV) and the IRR (Internal Rate of Return) using the Financial Calculator. How to Calculate Net Present Value. The Net Present Value (NPV) criterion is the principal government investment project evaluation criterion. #1 – No Set guidelines to Calculate Required Rate of Return. He's known as one of the most successful investors of all time. NPV = ∑Cashflow / (1+r)t – Initial Investment. For example, knowing an IRR of 30% alone. Where: NPV is the net present value. The break-even point for sales is 83. In the Financial menu, click the NPV. Evaluate the NPV: The calculated NPV will represent the present value of the future cash flows in. Calculates the net present value of an investment based on a series of periodic cash flows and a discount rate. The NPV function in Google Sheets uses the order of cashflow1, cashflow2,. The image below also shows investment #2. Using those assumptions, we arrive at a PV of $7,972 for the $10,000 future cash flow in two years. The present value (PV) determines how much future money is worth today. All of the cash flows are discounted back to their present value to be compared. What Is The NPV Function? The NPV determines the Net Present Value for a series of cash flows at a specified discount rate. 10% to the Free Cash Flow in the. The NPV function can also be used to calculate the present value of an individual cash flow. Here are formula to calculate PV and NPV. Cash flows are usually uncertain since both incomes and expenditure related to the project concern the future. The formula is as follows: Factor = 1 / (1 x (1 + Discount Rate) ^ Period Number) Sample Calculation. However, that’s all relatively abstract, so if you. 1 = 2000. XNPV. Click the blank cell to the right of your desired calculation (in this case, C7) and enter the PV formula: = PV (rate, nper, pmt, [fv]). Sample Usage NPV (0. This is the approach taken in the example shown, where the formula in F6 is: The NPV function returns 50962. If there is an additional cash flow at the start of the first period, it should be added to the value returned by the NPV. We apply the expected growth rate of 2. 55, while the NPV of project 2 is equal to –$29. There are two steps involved in calculating the discounted payback period. Use the discount rate for calculating the present value of the expected future cash flows. When calculated manually, the net present value formula can be complex, however it is rarely done this way. t = time of the cash flow. Hence, the net present value (NPV) of Project A is,The IRR function below calculates the internal rate of return of project A. the purchase. Calculate the present value of each cash flow by discounting at the specified cost of capital. The Ultimate Guide to Net Present Value (NPV) Calculation: Assumptions, Formula, Calculation in 6 Understandable Steps, 2 Real-Life Examples, Advantages & Disadvantages Here's the formula to use for calculating NPV: Net present value = -cost of initial investment + [cash flow of the first year / (1 + discount rate)] + [cash flow of the second year / (1 + discount rate)²] + [cash flow of the third year / (1 + discount rate)³] Net Present Value (NPV) merupakan selisih antara nilai sekarang arus kas masuk dan arus kas keluar selama periode tertentu. When a company or investor takes on a project or. The Net present value formula determines the total present value of a project's cash flows, including the return on the initial investment. The NPV function returns the result as $34. NPV Tips & Tricks. Notice that (1+r) is canceled out throughout the equation by doing this. Background. 0. NPV = Cash flow / (1 + i)^t – initial investment. To calculate NPV, we use the following formula: NPV = X * [ (1+r)^n - 1]/ [r * (1+r)^n] Where: X = The amount received per period. - ln (1 -. By Sam Swenson, CFA, CPA – Updated Feb 6, 2023 at 2:35PM. Internal Rate of Return. It is essentially the formula for calculating the net present value of an investment. Examples to Net Present Value Calculation in Google Sheets. One has to be very careful while calculating the PV of uneven cash flows as a small mistake may lead to a huge difference and eventually result in a loss. To calculate the NPV in this scenario, you would use the NPV formula mentioned. The present value formula should now read PV = 100/0. The perpetuity growth model is preferred among academics as there is a mathematical theory behind it. Because the time-value of money dictates that money is worth more now than it is in the future, the value of a project is not simply the sum of all future cash flows. 91. =XNPV (rate, values, dates) rate: The discount rate applied to the series of cash flows. MS Excel has two formulas that can be used to calculate discounted cash flow, which it terms as “NPV. For example, you may wish to invest $100,000 in a bond. I have been told that the second term looks like. For example, this will calculate the present value of the cash flows in cell range C2 to C5, where 0. The Excel formula for XNPV is as follows: =XNPV (Rate, Values, Dates) Where: Rate → The appropriate discount rate based on the riskiness and potential returns of the cash flows. Adjusted Present Value - APV: The adjusted present value is the net present value (NPV) of a project or company if financed solely by equity plus the present value (PV) of any financing benefits. The function will look like this on screen: NPV(12,-800,{100,200,300,400,500}) Press Enter to get the solution and you'll see that the NPV is $200. The NPV formula in Excel simply completes this process in one single step. Because of its simplicity, NPV is a useful tool to determine whether a project or investment will result in a net profit or a loss. This means that by choosing to. Therefore, NPV is a metric that is very useful to businesses and. To use the NPV formula, specify the following variables: Annual net cash flow. Because the time-value of money dictates that money is worth more now than it is in the future,. Z 2 = Cash flow in. 1. NPV = PV of future cash flows – Initial Investment To better understand the idea, let's dig a little deeper into the math. By utilizing the NPV formula, we can easily determine the present value of future cash flows. Here, I have taken the following dataset to explain this article. The Net Present Value (NPV) = Present Value – cost of investment. The fv argument is the future value or cash balance that you want to have after making your last payment. Excel bahkan sudah dilengkapi dengan rumus NPV. In other words, $100 is the present value of $110 that are expected to be received in the future. ] – X o. Syntax NPV. Select the Formulas tab. Please Note: NPV (net present value) is the sum of the present values for the cash inflows (cash received) and outflows (cash paid out). 17. Formula For the Net Present Value is given below: NPV = ∑ (CFn / (1 + i)n) – Initial Investment. Since the cash inflows are positive and the cash outflows are negative. • [IRR] is used for computing internal rate of return. Calculate NPV. The P's in the numerator can be factored out of the fraction and become 1. 16. It recommended a substantial increase. Otherwise, the “NPV” function would be more appropriate given irregular cash flows. Cash Flow is the sum of money spent and earned on the investment or project for a given period of time. If there is an additional cash flow at the start of the first period, it should be added to the value returned by the NPV. Then you need a good understanding of net present value (NPV). Here are some tips and tricks to help you get the most out of the NPV formula in Google Sheets: Remember that the discount rate should be expressed as a decimal. ) as used for the number of periods, n. NPV is the present value (PV) of all the cash flows (with inflows being positive cash flows and outflows being negative), which means that the NPV can be considered a formula for revenues minus costs. Step 3: Apply the discount rate to each cash flow by dividing it by (1 + r. The Excel NPV function has the syntax NPV(discount rate, range of cash flows. Negative values represent cash paid out; positive values represent cash received. The IRR is the discount rate at which the net present value (NPV) of future cash flows from an investment is equal to zero. 11. NPV FormulaThe net present value formula calculates NPV, which is the difference between the present value of cash inflows and the present value of cash outflows, over a period of time. Example. It is determined by, 1 / {1 * (1 + Discount Rate) Period Number} read more can be taken based on the interest rates or cost of funds for the company. 4. Conceptually, the IRR can also be considered the rate of return, where the net present value (NPV) of the project or investment equals zero. Net present value (NPV) merupakan hasil perhitungan. n is the number of years. 4. The payback period of a given investment or project is an important determinant of whether. Net Present Value is the present value of all cash inflows and outflows of a project over a period of time. NPV can be very useful for. + $38,800 (1+0,10) -15. To use a built-in formula, select Design > Equation. The NPV function can estimate the worth of investment and. Net present value does not take into account the size of the project. Therefore, the formula to calculate the net present value is: =NPV(B1,B5:B9)+B4 and the answer is $200. Second, the NPV method provides a clear decision criterion. Calculator Use. IRR Example #1: How IRR and NPV Are Related. The NPV function in Excel is simply NPV, and the full formula requirement is: =NPV(discount rate, future cash flow) + initial investment. The formula for discounted payback period is: Discounted Payback Period =. The first date indicates the beginning of the. However, if the payments are not even, the formula is a little more complicated because we need to calculate the present. NPV equals the sum of present values of all cash flows (inflows and outflows) in a project. The NPV is fundamental to understanding the concept of money's time value. In simple terms, NPV is the value (in today's currency) of future net cash flow (R) by time period (t). Description Calculates the net present value of an investment by using a discount rate and a series of future payments (negative values) and income (positive values). And we have discovered the Internal Rate of Return. Option 2: You can use Formula Builder to walk you through the formula step by step. Net Present Value is the cumulative sum of PV. Next, we sum these values. The formula for calculating NPV is as follows: Where in the above formula :. For example, a car loan or a mortgage is an annuity. One way to calculate Net Present Value in Excel is to use NPV to get the present value of all expected cash flows, then subtract the initial investment. When it comes to calculating NPV, the following formula shows how it is done. What is the net present value? By definition, net present value is the difference between the present value of cash inflows and the present value of cash outflows for a. The formula (NPV x Acapital recovery factor@): Problem: 2 projects A&B. Calculating net present value depends on the horizon of an investment. The NPV formula can be very useful for financial analysis and financial modeling when determining the value of an investment (a company, a project, a cost-saving initiative, etc. Calculates the net present value of an investment based on a series of periodic cash flows and a discount rate. In this example, we are getting a positive net present value of future cash flows, so in this example also we will. Net Present Value calculation with NPV function does not require dates. Please make sure to enter the payment and income values in the correct sequence. That’s why the input of the initial investment in cell B3 is – $1,000,000. In the example above, the formula entered into the. [1] The PPV and NPV describe the performance of a diagnostic test or other statistical measure. If the NPV is greater than zero, the project is profitable. it is 14% for that investment. Please make sure to enter the payment and income values in the correct sequence. 1. YIELDMAT function. The company’s CFO has asked you to calculate NPV using a schedule of future nominal cash flows. We can check this. First I think that the top value (numerator) is always a positive value and the bottom “left” value always matches the top value. Net Present Value is the present value of all cash inflows and outflows of a project over a period of time. When comparing two different investments using the net present value method, the length of the investment (n) is not taken into consideration. YIELDDISC. You will need to follow through with the next step in order to calculate the present value based on your inputs. Free Excel Course. 5 million. Step 2: Enter amounts in the Period and Cash columns. What is the NPV Formula? The NPV formula is a way of calculating the Net Present Value (NPV) of a series of cash flows based on a specified discount rate. 2. You can continue to use the NPV function but build an array using SEQUENCE instead of using a range if the cash inflows/outflows are identical. The Net Present Value (NPV) is a method that is primarily used for financial analysis in determining the feasibility of investment in a project or a business. Although NPV carries the idea of "net", as in the present value of future cash flows. The formula to use the PV function in Excel is as follows. Using a modern-day online net present value calculator is simple. The discount factor Discount Factor Discount Factor is a weighing factor most often used to find the present value of future cash flows, i. Net the cash outflows and inflows by adding them. The revision of the formula to calculate how India assesses the value of its forests was long pending. Dalam penganggaran modal dan perencanaan investasi, NPV digunakan untuk menentukan profitabilitas dari suatu investasi atau proyek yang diusulkan. Sample Usage NPV (0. 75. To use XNPV , we need a row containing dates, a row with. i = discount rate (rate of return)Here's the formula for calculating NPV: NPV = Σ [CFt / (1 + r)^t] - I₀. Definition and Meaning of NPV. The NPV (Net Present Value) function on Excel calculates the net present value for periodic cash flows based on a supplied discount rate and a series of payments. Here in the example, the cash flow is laid out, as well as the discount rate. PV is an Excel financial function that returns the present value of an annuity, loan or investment based on a constant interest rate. B: project NPV. The significant difference is that PPV and NPV use the prevalence of a condition to determine the likelihood of a test diagnosing that specific disease. Learn how to use the IRR formula. 83 discount factor = £41,500. There are several versions of the ROI formula. The initial investment of the business is entered with a negative sign as it represents outgoing cash. , $242. A growing perpetuity is a series of periodic payments that grow at a proportionate rate and are received for an infinite amount of time. Because the time-value of money dictates that money is worth more now than it is in the future, the value of a project is not simply the sum of all future cash flows. This can be done using the following formula: PV = CF / (1 + r)t. Could someone explain how the second term. This usually denotes a profitable investment or endeavor. The Net Present Value (NPV) is a frequently used and critical measure of investment performance. Timo on Feb 09, 2022 @Evandro and @Nina - You need to be careful in defining the discount rate: The discount rate is the "divisor" of the PV-formula, hence the discount rate's formula is 1/(1+r)^t. . The paper contains a description of a possible modification of the original Net Present Value which allows one to evaluate projects under uncertainty with unknown probabilities (understood mainly as frequencies). . The NPV measures the excess or shortfall of cash flows, in present value terms. Kamu hanya tinggal memasukkan angka-angka dari nilai investasi awal, persentase tingkat keuntungan/diskonto, dan arus kas masuk (keuntungan) tiap tahun. Enterprise. Generally calculated using formula PV = FV / [1+i] ^n, where FV = Future value, i = rate of interest, and n = number of years (^ signifies an exponent). Secondly, use the corresponding formula in the C11 cell. 1 is the discount rate. NPV = Cash flow / (1 + i)t – initial investment. The above formula gives this answer: $110/ (1+10%)^1 = $100. The formula is now reduced to. When revenues are greater. NPV formula for a project with. Once you have the three items listed above, you can calculate Net Present Value in Excel. NPV = [cash flow / (1+i)^t] - initial investment In this formula, "i" is the discount rate, and "t" is the number of time periods. But you know that this future money is worth less than today’s money, so you want to get a more accurate picture by using the Net Present Value Calculation.