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Do you have what it takes to be an entrepreneur? These videos can help you get your business off the ground.
You Will Need
- Initial cost outlay
- Estimated returns on investment
- Discount rate
- Investment period
- Present value
- Net present value
Estimate the value of an investment
Estimate the value of the investment of an initial cost outlay today and at one or more times in the future. The initial cost outlay is the cost of entering the project.
Calculate the present value
Calculate the present value of your investment over a period of time using the equation C1 divided by (1 plus r) plus Cn divided by (1 plus r)n where Ci is the cash flow in period 1, n is the number of periods, and r is the discount rate.
Calculate net present value
Calculate the net present value by subtracting the initial investment from the computed present value.
Decide whether the investment makes sense
A positive net present value means the investment is acceptable; a negative net present value means the investment is not a good idea.