Calculating Net Present Value NPV

On any project, it is important to know what the present value of the contract amount will be, even if the project is scheduled over a few years. A technique available to project managers is to discount future dollar values, or calculate the NPV, which transforms future benefits and costs to their "present value." The NPV allows the project manager to determine the value of a dollar one or more years from the date of the calculation. The present value (also referred to as the discounted value) of a future amount is calculated by using the following NPV formula:

Where P = Present Value, F = Future Value, I = Interest Rate, and n = number of years.

0 0

Post a comment