[ See also Net Present Value @ Wikipedia ]
| NPV = \sum_{i=0}^n \frac{R_{ti}}{(1+r)^{t_i}} = R_0 + \sum_{i=1}^n \frac{R_{ti}}{(1+r)^{t_i}} |
where
n | total number of time steps |
|---|---|
t_i | time passed since the first investment ( assuming that t_0 = 0) |
r = \rm \frac{Cash_{out} - Cash_{in}}{Cash_{in}} | the discount rate, i.e. the return that could be earned per unit of time on an investment with similar risk, which is assumed constant over time |
R_{ti} = \rm Cash_{in}(t_i) - \rm Cash_{out}(t_i) | the net cash flow at time step t_i |
R_0 = - \rm Cash_{out}(t=0) | the volume of cash investment at initial time moment t_0 = 0 |