NETPV Function

Returns the net present value as a percent.

Categories:	Financial
	CAS

Table of Contents

Syntax

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

Required Arguments

r

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

Range

r >= 0

frequency

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

Range	frequency > 0
Note	The case frequency = 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 frequency>0 describes the number of payments that occur over the specified base period of time.

The net present value is given by the equation:

multiline equation line 1 upper N upper E upper T upper P upper V left-parenthesis r comma f r e q comma c 0 comma c 1 comma period period period comma c Subscript n Baseline right-parenthesis equals normal upper Sigma Underscript i equals 0 Overscript n Endscripts c Subscript i Baseline x Superscript i

The following relationship applies to the preceding equation:

multiline equation line 1 x equals StartLayout Enlarged left-brace 1st Row 1st Column StartFraction 1 Over left-parenthesis 1 plus r right-parenthesis Superscript left-parenthesis 1 slash f r e q right-parenthesis Baseline EndFraction 2nd Column f r e q greater-than 0 2nd Row 1st Column epsilon Superscript negative r Baseline 2nd Column f r e q equals 0 EndLayout

Missing values in the payments are treated as 0 values. When frequency>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% with monthly cash payments, set frequency to 3 and set r to .04.

If frequency 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% discounted continuously with monthly payments, set frequency to 0 and set r to .11/12.

Example

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%, the net present value of the investment can be expressed as follows:

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

The value that is returned is 95.982864829.

NETPV Function

Syntax

Required Arguments

r

frequency

c0, c1, ..., cn

Details

Example

See Also