Present Value

$$PV=\frac{C_n}{(1+r{)}^n}$$

• PV = Present Value
• C = Cash Flow
• r = Discount rate or discount factor (when evaluating an investment, the hurdle-rate), the key assumption
• n = period

NPV

Can be used to evaluate an investment.

$$NPV=\sum _{i=1}^n\frac{C_i}{(1+r{)}^i}-C_0$$

• $C_0$ = initial investment (first year)
• Discounted or current value of future cashflows
• Considers time-value of money
• Considers hurdle-rate

Available as an Excel function