Net Present Value

The present value of expected cash flows minus the initial cost.
In other words, like the internal rate of return method, the net present value method is a discounted cash flow
approach to capital budgeting. The net present value(NPV) of an investment proposal is the present value of
the proposal’s net cash flows less than the proposal’s initial cash outflow. In formula form we have:

CF1 CF2 CFn

NPV = + + ⋯+ − ICO
(1 + IRR)1 (1 + IRR)2 1 + IRR n

‫ کـاله وي او د هـرکـال په پـای کې ورڅخه په تـرتـیـب سـره‬5 ‫ او عمر یې‬$3000 ‫ کــه چـېرته د یوې پروژې لومړنـی لـګښـت‬:‫مــثال‬
‫ تاسو د نوموړې پروژې خالص فعلي‬، ‫ وي‬6% ‫ که چېرته د تنزیل اړین نرخ‬. ‫ ترالسه کېږي‬$1000,$800,$1000,$400 ,$300
.‫(کړئ‬NPV) ‫ارزښت پیدا‬

Prepared by: Abdullah Shah Khavreen 37

 Net Present Value
:‫د مثال حل‬

300 400 1000 800 1000

NPV = + + + + − 3000
(1 + 0.06)1 (1 + 0.06)2 (1 + 0.06)3 1 + 0.06 4 1 + 0.06 5

300 400 1000 800 1000

NPV = + + + + − 3000
(1.06)1 (1.06)2 (1.06)3 1.06 4 1.06 5

300 400 1000 800 1000

NPV = + + + + − 3000 ⇒
1.06 1.1236 1.191 1.262 1.338

NPV = 283.02 + 355.99 + 839.62 + 633.67 + 747.26 − 3000 = 2859.56 − 3000 = −$140.44
NPV = −$140.44 ⇒ NPV < 0
.‫ < 𝑉𝑃𝑁 نو یاده پروژه باید د پانګونې لپاره نتخاب نشي‬0 ‫داچې‬

Prepared by: Abdullah Shah Khavreen 38