question Re: The NPV calculation on Demand and Project form financial tab? in SPM forum

The NPV calculation on Demand and Project form financial tab?

Chandler2 — Thu, 31 Mar 2022 20:12:37 GMT

I have found many articles on it but still not able to actually get the calculation work which gives the result as the populated number in NPV.

I see the formula many places but what is the t in the formulas]? Time period then what, year of the cost plan or fiscal period?
Any detailed example?

Re: The NPV calculation on Demand and Project form financial tab?

Filipe Cruz — Thu, 31 Mar 2022 21:17:05 GMT

Hello Chandler,

This is the current NPV formula:

The script where the NPV is calculated is the following one:

IRRAndNPVAPI

Here is the code that does the calculation:

netPresentValue: function(rate){
        var rate = rate/100, npv = this.args[0];
        for (var i = 1; i < this.args.length; i++) {
            npv +=(this.args[i] / Math.pow((1 + rate), i));
        }
        return Math.round(npv * 100) / 100;
    },

Hope this helps you!!

Please mark my answer as correct and helpful if it is relevant for you!

Thanks,

Filipe Cruz

Re: The NPV calculation on Demand and Project form financial tab?

Chandler2 — Fri, 01 Apr 2022 10:51:03 GMT

Hi,

Can you point me where this script is written.

Q 1. So whatever you have in formula it is all exactly as it is?

Q 2. What will be the value of n?

Re: The NPV calculation on Demand and Project form financial tab?

Filipe Cruz — Fri, 01 Apr 2022 20:03:48 GMT

Hi Chandler, The script is "IRRAndNPVAPI". N represents the current year. You also need to check for other script includes invoking the one I mentioned. I'm not in front of the laptop, so I cannot point it out right now. Please let me know if you need my assistance in this subject! Best Regards, Filipe Cruz

Re: The NPV calculation on Demand and Project form financial tab?

Vinay3 — Tue, 05 Apr 2022 09:06:23 GMT

Hi Chandler,

Please find the below example to understand how NPV is calculated:

Total planned cost of FY22 (Current year): 180000

Total planned benefit of FY22 (Current year): 240000

Total planned cost of FY23 (Current year + 1): 180000

Total planned benefit of FY22 (Current year + 1): 240000

ROI = Total Planned Benefit - Total Planned cost = 480000-360000 = 120000

NPV = (240000-180000) + [(240000-180000)/(1+0.11)] = 114054

The discount rate is applied to the planned cost and benefits amount for future calendar year to the power of difference between the future year and the current year, which in the above example is 1.