Financial Modeling Tutorials

- Excel Modeling
- Financial Functions in Excel
- Sensitivity Analysis in Excel
- Sensitivity Analysis
- Capital Budgeting Techniques
- Time Value of Money
- Future Value Formula
- Present Value Factor
- Perpetuity Formula
- Present Value vs Future Value
- Annuity vs Pension
- Present Value of an Annuity
- Doubling Time Formula
- Annuity Formula
- Present Value of an Annuity Formula
- Future Value of Annuity Due Formula
- Maturity Value
- Annuity vs Perpetuity
- Annuity vs Lump Sum
- Deferred Annuity Formula
- Internal Rate of Return (IRR)
- IRR Examples (Internal Rate of Return)
- NPV vs XNPV
- NPV vs IRR
- NPV Formula
- NPV Profile
- NPV Examples
- Advantages and Disadvantages of NPV
- Mutually Exclusive Projects
- PV vs NPV
- IRR vs ROI
- Break Even Point
- Break Even Analysis
- Breakeven Analysis Examples
- Break Even Chart
- Benefit Cost Ratio
- Payback Period & Discounted Payback Period
- Payback period Formula
- Discounted Payback Period Formula
- Payback Period Advantages and Disadvantages
- Profitability Index
- Feasibility Study Examples
- Cash Burn Rate
- Interest Formula
- Simple Interest
- Simple Interest vs Compound Interest
- Simple Interest Formula
- CAGR Formula (Compounded Annual Growth Rate)
- Growth Rate Formula
- Effective Interest Rate
- Loan Amortization Schedule
- Mortgage Formula
- Loan Principal Amount
- Interest Rate Formula
- Rate of Return Formula
- Effective Annual Rate
- Effective Annual Rate Formula (EAR)
- Compounding
- Compounding Formula
- Compound Interest
- Compound Interest Examples
- Daily Compound Interest
- Monthly Compound Interest Formula
- Discount Rate vs Interest Rate
- Discounting Formula
- Rule of 72
- Geometric Mean Return
- Geometric Mean vs Arithmetic Mean
- Real Rate of Return Formula
- Continuous compounding Formula
- Weighted average Formula
- Average Formula
- EWMA (Exponentially Weighted Moving Average)
- Average Rate of Return Formula
- Mean Formula
- Mean Examples
- Population Mean Formula
- Weighted Mean Formula
- Harmonic Mean Formula
- Median Formula in Statistics
- Range Formula
- Outlier Formula
- Decile Formula
- Midrange Formula
- Quartile Deviation
- Expected Value Formula
- Exponential Growth Formula
- Margin of Error Formula
- Decrease Percentage Formula
- Relative Change
- Percent Error Formula
- Holding Period Return Formula
- Cost Benefit Analysis
- Cost Benefit Analysis Examples
- Cost Volume Profit Analysis
- Opportunity Cost Formula
- Opportunity Cost Examples
- APR vs APY
- Mortgage APR vs Interest Rate
- Normal Distribution Formula
- Standard Normal Distribution Formula
- Normalization Formula
- Bell Curve
- T Distribution Formula
- Regression Formula
- Regression Analysis Formula
- Multiple Regression Formula
- Correlation Coefficient Formula
- Correlation Formula
- Correlation Examples
- Coefficient of Determination
- Population Variance Formula
- Covariance Formula
- Coefficient of Variation Formula
- Sample Standard Deviation Formula
- Relative Standard Deviation Formula
- Standard Deviation Formula
- Standard Deviation Examples
- Effect Size
- Sample Size Formula
- Volatility Formula
- Binomial Distribution Formula
- Multicollinearity
- Hypergeometric Distribution
- Exponential Distribution
- Central Limit Theorem
- Poisson Distribution
- Central Tendency
- Hypothesis Testing
- Gini Coefficient
- Quartile Formula
- P Value Formula
- Skewness Formula
- R Squared Formula
- Adjusted R Squared
- Regression vs ANOVA
- Z Test Formula
- Z Score Formula
- Z Test vs T Test
- F-Test Formula
- Quantitative Research
- Histogram Examples

Related Courses

## NPV Examples (Net Present Value)

The following NPV example (Net Present Value) provides an outline of the most common investment decisions. It is impossible to provide a complete set of examples that address every variation in every situation since there are thousands of such projects with Net Present Value analysis. Each example of the NPV states the topic, the relevant reasons, and additional comments as needed

Net present value is the difference between the present value of future cash inflow and the present value of cash outflow over a period of time. NPV is widely used in capital budgeting and to know the profitability of the project.

- If the Net present value is positive then the project should be accepted. It indicates that earning from the project is more than the amount invested in the project, so the project should be accepted.
- If the Net present value is negative then it indicates that the project in which we invested the money does not provide a positive return so the project should be rejected.

Mathematically, NPV Formula is represented as,

**NPV = Cash Flows /(1- i)**

^{t}– Initial InvestmentWhere

- i stands for the Required Rate of Return or Discount Rate
- t stands for Time or Number of Period

### Examples of Net Present Value (NPV)

Let’s see some simple to advanced examples of Net present value to understand it better.

#### Example #1

**Company A ltd wanted to know their net present value of cash flow if they invest 100000 today. And their initial investment in the project is 80000 for the 3 years of time and they are expecting the rate of return is 10 % yearly. From the above available information, calculate the NPV.**

**Solution:**

Calculation of NPV can be done as follows,

NPV = Cash flows /(1- i)t – Initial investment

= 100000/(1-10)^3-80000

**NPV** = **57174.21**

So in this example, NPV is positive so we can accept the project.

4.9 (1,067 ratings)

#### Example #2

**In 2 ^{nd} example, we will take the example of WACC (weighted average cost of capital) for calculating the NPV, because in WACC we consider the weight of equity and debt also the cost of equity and debt.**

**Calculate the NPV.**

**Solution:**

Company XYZ Ltd provides the following detail regarding their project for 10 years.

Free cash flow to the firm is given below over a period of time. And WACC is 15 %

Calculation of NPV can be done as follows,

** NPV** =**1104.55**

In this example also Net present value is positive so we can or we should accept the project

#### Example #3

**Maruti is in the business of auto and ancillary and they want to start their subsidiary business as an expansion plan for assembling of the auto part so they had provided below information for calculating the NPV. They want to know should this project will be feasible or not.**

**Cost of equity – 35%****Cost of debt – 15%****The weight of equity – 20%****The weight of debt – 80 %****Tax rate – 32%****Cash flow is given below for 7 year****2010= -12000****2011=10000****2012=11000****2013=12000****2014=13000****2015=14000****2016=15000**

**Find the NPV with the help of WACC.**

**Solution:**

Calculation of WACC can be done as follows,

WACC formula = We*Ce+Wd*Cd*(1-tax rate)

= 20*35+80*15*(1-32)

** WACC** = **15.16%**

Calculation of NPV can be done as follows,

**NPV** =** 29151.0**

In this example, we are getting a positive net present value of future cash flows, so in this example also we will accept the project.

#### Example #4

**Toyota wants to set up one new plant for expansion of current business so they want to check the feasibility of the project. Toyota had provided the following information regarding cash flows and WACC. ****Cash flow during the period is as follow.**

- 2008 = -4000
- 2009= -5000
- 2010= 6000
- 2011=7000
- 2012=9000
- 2013= 1200

**Solution:**

Calculation of NPV can be done as follows,

**NPV** = **12348.33**

### Recommended Article

This has been a guide to NPV Examples. Here we learn how to calculate NPV (Net Present Value) step by step with the help of practical examples. You may learn more about financing from the following articles –

- What is the Nominal Rate of Return?
- Importance of Capital Budgeting
- Top 5 Best Capital Budgeting Techniques
- Examples of Capital Budgeting
- Marginal Tax Rate | Definition
- Formula of Time Value of Money
- PV of an Annuity
- PV vs NPV – Compare
- NPV vs IRR – Compare

- 250+ Courses
- 40+ Projects
- 1000+ Hours
- Full Lifetime Access
- Certificate of Completion