NETPV

NETPV

Returns the net present value as a fraction

Category: Financial

Syntax
Details
Examples

Syntax

NETPV(r,freq,c0,c1, . . . ,cn)

r

is numeric, the interest rate over a specifed base period of time expressed as a fraction.

freq

is numeric, the number of payments during the base period of time that is specified with the rate r.

Range:	freq > 0
Exception:	The case freq = 0 is a flag to allow continuous discounting.

c0,c1, . . . ,cn

are numeric cash flows that represent cash outlays (payments) or cash inflows (income) occurring at times 0, 1, ... n. These cash flows are assumed to be equally spaced, beginning-of-period values. Negative values represent payments, positive values represent income, and values of 0 represent no cash flow at a given time. The c0 argument and the c1 argument are required.

Details

The NETPV function returns the net present value at time 0 for the set of cash payments c0,c1, . . . ,cn, with a rate r over a specified base period of time. The argument freq>0 describes the number of payments that occur over the specified base period of time.

The net present value is given by

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where

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Missing values in the payments are treated as 0 values. When freq>0, the rate r is the effective rate over the specified base period. To compute with a quarterly rate (the base period is three months) of 4 percent with monthly cash payments, set freq to 3 and set r to .04.

If freq is 0, continuous discounting is assumed. The base period is the time interval between two consecutive payments, and the rate r is a nominal rate.

To compute with a nominal annual interest rate of 11 percent discounted continuously with monthly payments, set freq to 0 and set r to .11/12.

Examples

For an initial investment of $500 that returns biannual payments of $200, $300, and $400 over the succeeding 6 years and an annual discount rate of 10 percent, the net present value of the investment can be expressed as

   value=netpv(.10,.5,-500,200,300,400);

The value returned is 95.98.

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