# Program to calculate NPV

Net present value, or NPV, is used to calculate the current total value of a future stream of payments.

If the NPV of a project or investment is positive, it means that the discounted present value of all future cash flows related to that project or investment will be positive, and therefore attractive.

To calculate NPV, you need to estimate future cash flows for each period and determine the correct discount rate.

where:

Rt = Net cash inflow/outflows during a single period

ti = Discount rate/return that could be earned in alternative investments

t = Number of timer periods

## Calculating NPV with Python

let us consider project (X) with following specifications:

life time = 15 years

initail investments = 2000000 $

final project value = 1000000 $

project_cash_flow = [ - 2000000, 0 , 0 , 250000, 250000, 500000, 500000, 750000, 750000, 500000, 500000, 500000, 500000, 500000, 1000000]

discount_rate = [0.05, 0.055, 0.06, 0.065, 0.07, 0.075, 0.08, 0.085, 0.09, 0.095, 0.1, 0.105, 0.11, 0.115, 0.12, 0.125, 0.13, 0.135, 0.14, 0.145, 0.15]

we decide to perform a Net Present Value (NPV) analysis to determine the profitability of the project

##### Importing the python packages

```
import matplotlib.pyplot as plt
import matplotlib.pyplot as plt
```

Input Data

```
project_cash_flow= [-2000000, 0, 0, 250000, 250000, 500000, 500000, 750000, 750000, 500000, 500000, 500000, 500000, 500000, 1000000]
discount_rate = [0.05, 0.055, 0.06, 0.065, 0.07, 0.075, 0.08, 0.085, 0.09, 0.095, 0.1, 0.105, 0.11, 0.115, 0.12, 0.125, 0.13, 0.135, 0.14, 0.145, 0.15]
```

Function to calculate NPV

```
def calculate_npv(rate, cash_flow):
npv = 0
for t in range(len(cash_flow)):
npv += cash_flow[t]/(1+rate)**t
return npv
npvs_a = list()
for rate in discount_rate:
npv_a = calculate_npv(rate,project_a)
npvs_a.append(npv_a)
```

Graphical Representation

```
plt.plot(discount_rate,npvs_a, linewidth = 3.0, color = "green", label = "Project X")
plt.axhline(y=0, linewidth = 0.5, color = "black")
plt.title('NPV Profile: Project X')
plt.xlabel('Discount Rate')
plt.ylabel('Net Present Value')
plt.legend()
plt.show()
```

Output Graph