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A popular mechanism of measuring the discounted cash flow value of the the net profit:
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NPV = \sum_{i=0}^n \frac{R_{t_i}}{(1+r)^{t_i}} = R_0 + \sum_{i=1}^n \frac{R_{t_i}}{(1+r)^{t_i}} |
where
| 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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body | r = \rm \frac{Cash_{out} - Cash_{in}}{Cash_{in}} |
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| discount rate |
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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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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.
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