Net present value and cash flows

Introduction to Financial Concepts in Python

Dakota Wixom

Quantitative Finance Analyst

Cash flows

Cash flows are a series of gains or losses from an investment over time.

Assume a 3% discount rate

Year	Cash Flows	Formula	Present Value
0	-$100	pv(rate=0.03, nper=0, pmt=0, fv=-100)	-100
1	$100	pv(rate=0.03, nper=1, pmt=0, fv=100)	97.09
2	$125	pv(rate=0.03, nper=2, pmt=0, fv=125)	117.82
3	$150	pv(rate=0.03, nper=3, pmt=0, fv=150)	137.27
4	$175	pv(rate=0.03, nper=4, pmt=0, fv=175)	155.49

Sum of all present values = 407.67

Example:

import numpy as np
array_1 = np.array([100,200,300])
print(array_1*2)

[200 400 600]

Project 1

import numpy as np
np.npv(rate=0.03, values=np.array([-100, 100, 125, 150, 175]))

407.67

Project 2

import numpy as np
np.npv(rate=0.03, values=np.array([100, 100, -100, 200, 300]))

552.40

Introduction to Financial Concepts in Python