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Indicators of efficiency of investments

Calculation of key performance indicators in the Budget Plan Express
Payback period – PB
Discounted payback period – DPB
Net discounted (present) value – NPV
Profitability index – PI
Internal rate of return – IRR
Average rate of return – ARR
Modified IRR – MIRR (Modified Internal Rate of Return)
Economic profit measure EVA (Economic Value Added) and other complex indicators

Net discounted (present) value – NPV


Net discounted (present) value – NPV


Net present value is the amount of income that represents the estimate of the present value of future income. The net present value is the present value of future income, adjusted for the discount rate, less the present value of the initial (total) investment. Calculated by the formula:

    Net present value is the value of income, which represents the assessment of the present value of the future income. Budget-Plan Express all calculated indicators of efficiency of investments
    The net present value is the present value of future earnings, adjusted by the discount rate, minus the present value of the initial (total) investment


    Where:
    CFn – net discounted cash flow in the n period,
    In – investment in the n period (or total investment),
    r – discount rate,
    NCF – net cash flow (NCF), is used in the alternative NPV calculation formula.

The value of NPV must be positive :
  1. NPV > 0 – shows how much the value of the invested capital will increase;
  2. NPV = 0 – the project will not bring any profit or loss;
  3. NPV < 0 – shows losses as a result of the project.

☛ Note that the result of calculations is influenced by the discounting step chosen by the user, and other settings of the calculation parameters of investment indicators.





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