1.4.5.1.4. Net Present Value (NPV)Another time value of money concept that has to do with serial payments is net present value, or NPV . This calculation is a more complex version of the basic present value calculation mentioned earlier. Under a net present value calculation, the present value of each future cash inflow and outflow is calculated. Then the results are added to determine whether, in the present, the project has a positive value or negative value for a company or investor.
For example, if a company was going to invest $10,000 today, receive $4,000 each of the next three years, and then have to pay an additional $1,000 to exit the investment, an investor or company would want to know if the investment will result in a loss once the time value of money is considered.
Assuming an 8% annual interest rate, the calculation may look something like this, with the present values of money flowing out represented by negative numbers and money flowing in represented by positive numbers:
Cash Flows
Present Value
Initial Investment
– $10,000
– $10,000
Year #1 Payment
+ $4,000
+ $3,704
Year #2 Payment
+ $4,000
+ $3,429
Year #3 Payment
+ $4,000
+ $3,175
Final Investment
– $1,000
VIDEO
Since you're reading about Series 65: 1.4.5.1.4. Net Present Value (NPV) , you might also be interested in:
Please Enable Javascript
TESTIMONIALS
What are people saying?
I just passed my Series 65 exam yesterday!! Your study material was awesome! Unfortunately, they only provided pass/fail and no specific grade because I wanted to know how well I did. Thanks so much!
Cheryl Fluker, Members Advisory Group, Williamsville, NY
I passed the exam (Series 65) on the first try only using your study prep. Worked great for me!
Michael Carmody Brentwood, TN
I passed the Series 65 today. Thanks so much. The Series 65 Exam Simulator and the iPhone app were my only study instruments. I didn't have any other study materials. Granted, I know that you encouraged me to not use the exam simulator as my sole source, but I found your practice tests to be more difficult than the actual exam. I had taken the series 65 in 1994, but it is a different test now. I received an 89%, finished 55 minutes early. I just took your exam simulator tests over and over. Funny thing, I was getting in the 75% range on your exams. Never broke 80%. Great apps! I really appreciate your generosity in extending my subscription to complete my prep. You are a good man. Thank you.
Daniel Q. Humphrey, Financial Guard, Pleasant Grove, Utah
I have used other providers in the past for the 62 and
decided to try something new this time due to passing that by a thin margin out
of luck. I passed the 65 first try with
an 88% all thanks to Solomon Exam Prep and its effective 5-week program. The book is thorough and easy to follow and
the endless question bank with detailed explanations ensures that you will
never see a repeat and never have to worry about question memorization (which
is CRITICAL when you are assessing how ready you are based off of practice
tests). The quizzes and exams require a
deeper level of understanding, unlike other providers that test you with
elementary questions only to leave the actual exam to feel unpleasantly
difficult. The practice quizzes provide
a very convenient way to focus on your weak areas and the full simulation exams
feel very much like the actual test and in my experience, made the real exam
seem surprisingly easy. The practice
questions also reinforce important test taking skills and taught me to approach
questions in a more disciplined way than before. Finally, I gave the “ask the professor”
function a try and they are VERY responsive and clearly have a passion for
seeing their clients succeed. I couldn’t
be happier with this program and even though you might hear about the other
test prep companies more often, Solomon IS the most effective.
Bates Parsons, Denver, CO
I have been extremely happy with your book series. I was able to pass the Series 66 and Series 65 with flying colors on the first try! Thanks again.
Christian Brown, Financial Decisions Group
Special thanks to Solomon for ensuring I pass the 65! Trust in the material and you will pass. I bought multiple resources and by far, Solomon was the best. Thanks again.
Paige Robino,
Fisher Investments,
Plano, TX
Read more reviews
