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401 Appendix C - Calculating NPV, Payback Period, and ROI
Net Present Value
method by which all benefits and costs are calculated in terms of todays dollars and are then combined to give a net value
a rate used to equate future values to present values ex. $94.34 will be worth $100 in one year with discount rate of 6%
the accumulation of yearly discounts based on the discount rate Calculated using F=1/(1+I)^n
calculated: present Value= amount received in future/(1+i)^(number of years)
the time it takes for you to payback an investment
fraction of a year
calculation: (| beginning year amount|/(year-end amount+| beginning year amount|))
ROI=(est. time period benefits-est. time period cost)/est. time period costs