The calculation of the net present value (NPV) is a budgeting technique that equates the discounted cash flows against the initial investment.  The mathematical formula is: $$NPV = \sum_{t=1}^{n}\frac{FV_{t}}{(1 + k)^{t}} - I$$ Where: FV = Future cost of the cash inflows, I = Initial Investment k = Discount rate equal to the owner's cost of capital I … [Read more...]