NPV, or Net Present Value, refers to the sum of cash flows in a business. It can also record future cash flows that will come in like coupons and bonds. A NPV can also record the cash outflow which is usually the purchase price; this refers to the difference between the PV of future cash flows and the purchase price.
The NPV is a primary tool in discounted cash flow analysis which is normally used for assessing the time value of money in appraising long-term projects. It is widely used in the business for capital budgeting, as in the arena of economics, accounting and finance. It measures the surplus or shortfall of cash flows with financing charges in present value terms.
The NPV records the performance of some cash flows and the relevant discount rates to display a price.
A NPV template can record:
* Cash investment
* Expected cash returns
* Expected discount percentages
* Projected NPV
* Cash Return
* Calculation of reciprocal discount rate
* Cash out
* Cash in
* Discounted flow by specific year
The NPV template allows the user to enter the cash investment, which is a cash flow in, and a cash return, which is a cash flow out. The discount rate % assumption for each year is also input, except for the starting year (year 0).
Hence, the NPV template will automatically compute the cash out, cash in and discounted flow at each year.
Consider the attached sample template for your convenience.