how to calculate net present value
Net present value is the sum of all discounted cash inflows and outflows. A discounted cash flow is equal to the cash flow divided by one plus the interest rate to the power of the period the cash flow occurs. The dollar value of the initial project cash outlay is a negative number already at present value.ominal Net Present Value. In the standard net present value calculation, the discount rate includes the effects of inflation. As an alternative, you can calculate net present value by converting the real cash flows to nominal cash flows and use a nominal discount rate. Both methods yield the same final number.