Simple Example to calculate Net Present Value and Pay Back Period.

1. A Simple Example to calculate Net Present Value and Pay Back Period
Net-Present Value (NPV)
- Present Value (PV)
- Future Value (FV)
- Rate Of Interest (r)
- No. Of Years (n)
 How to Calculate the NPV?
PV =(FV)/(1+r%)
REVENUE = Inflow
EXPENDITURE = Outflow
NPV=PVRevenue - PVExpenditure
Example:
Revenue = 50,000 Dhs
Expenditure = 495,000 Dhs
Rate of Interest (r) = 10%
No. of Years (n) = 3
PVRevenue= (500,000)/ (1+10%)3=375,657.4 Dhs
PVExpenditure= (495,000)/ (1+10%)3=371,900.826 Dhs
NPV=PVRevenue - PVExpenditure= 375,657.4-371,900.826=3756.574 Dhs
Pay Back Period (PBP)
PBP = No. of Years * ((Total Investment-Cumulative Total)/(stable return))
Example:

2. Total Investment = 500,000 Dhs
Income:
 1 Year = 100,000 Dhs
 2 Year = 300,000 Dhs
 3 Year = 300,000 Dhs
 ….
 ….
 ….
 xYear = ……
PBP == 2 Years+((1/3)*12Month) = 2Years+4 Month