Start networking and exchanging professional insights

Register now or log in to join your professional community.

Follow

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

user-image
Question added by TAHIR SAJJAD , Chief Accountant , Yousef Fouad Zuhairy Group. (Deals in Automotive & Elevators Installation Business)
Date Posted: 2013/09/26
Muhammad Arsalan
by 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

More Questions Like This

Do you need help in adding the right keywords to your CV? Let our CV writing experts help you.