How do you calculate net present value?

it is to do with two investment projects. i have the time, and cash flow values for both projects.

The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project.

NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield.
NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield.

NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account. If the NPV of a prospective project is positive, it should be accepted. However, if NPV is negative, the project should probably be rejected because cash flows will also be negative.

For example, if a retail clothing business wants to purchase an existing store, it would first estimate the future cash flows that store would generate, and then discount those cash flows into one lump-sum present value amount, say $565,000. If the owner of the store was willing to sell his business for less than $565,000, the purchasing company would likely accept the offer as it presents a positive NPV investment. Conversely, if the owner would not sell for less than $565,000, the purchaser would not buy the store, as the investment would present a negative NPV at that time and would, therefore, reduce the overall value of the clothing company.

http://www.investopedia.com/terms/n/npv.... --- if you want to practice..

As well as the dates and cash amounts, you need to know the "time value of money", normally represented by what is called the "yield curve" - that's the graph of interest rate vs time, where interest rate is calculated on a "zero coupon" basis (ie no intermediate interest payments).

Basically, for each payment in the future you then use the yield curve to calculate how much money you could borrow today, and have the loan paid off, with interest, by that much cash coming in that number of days into the future. That's the Present Value.

eg if interest rates for 12-month borrowings are currently 6%, then a cashflow of 拢1,000 on a date 1 year in the future has a present value of (拢1,000/1.06) = 拢943.40

Add up all the present values of the different cashflows - in and out with opposite signs, of course - and you get the net present value of the whole project.

http://www.investopedia.com/calculator/N...

This will calculate the NPV for you!