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متابعة

Can you describe methods to calculate NPV & IRR and explain its key features?

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تم إضافة السؤال من قبل TAHIR SAJJAD , Chief Accountant , Yousef Fouad Zuhairy Group. (Deals in Automotive & Elevators Installation Business)
تاريخ النشر: 2013/09/26
Muhammad Arsalan
من قبل Muhammad Arsalan , Assistant Manager of Operations , Albaraka bank Pakistan Ltd

NPV Calculation Method

 

PV = Future value/(1 + i)`n

When we calculate the Present Value (P.V) of all or different years then we sum or add the whole P.V's, the sum of all PV's will become NPV

NPV = FV/(!+i)`1 + F.V /(1+i)`2+.....................+F.V/(1+i)`n

 

IRR Calculation Method

 

The Internal Rate of Return is a rat of return used in capital budgeting to compare the profitability of investment, it is also known as discounted cash flow.  

 

A rate of return on which the NPV become zero is an internal rate of return.

\mathrm{NPV} = \sum_{n=0}^{N} \frac{C_n}{(1+r)^{n}} =0

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