Net Present Value Calculator
The Net Present value, also called present discounted value. The Net present value is equal to Future value divided 1 numbers of value added to interest rate (%).
Let us consider,
- PV = present value
- FV = future value
- r = interest rate
The present value for more than one period of time, you need to raise the (1+r) by the number of period.
n = number of periods.
calculate the present value
If you read the previous paragraph you already know that to estimate present value you need to:
- Determine the future value. In our example let’s make it $ 200
- Determine a periodic rate of interest. Let’s say 7%
- Determine the number of periods. Let’s make it 2 years.
- Divide the future value by (1+rate of interest)^periods
In our example it will look like this:
200$/(1+0.07)2 = 200.14$
The answer is Present value = 200.14$