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| total number of time steps (usually time step is one year) |
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| time passed since the first investment ( assuming that ) |
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| LaTeX Math Inline |
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| body | r = \rm \frac{Cash_{out} - Cash_{in}}{Cash_{in}} |
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| discount rate |
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| LaTeX Math Inline |
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| body | R_{t_i} = \rm Cash_{in}(t_i) - \rm Cash_{out}(t_i) |
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| the net cash flow at time step |
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| LaTeX Math Inline |
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| body | R_0 = - \rm Cash_{out}(t=0) |
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| the volume of cash investment at initial time moment |
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Usually
, where and is number of years past.
The main idea of NPV is to start wth the statement that value of cash today is higher than value of cash tomorrow because immediate cash can be safely invested today and start brining some profit.
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