Print("Periodic cash flow value:%5. Print("Compounding frequency:%d"%compoundingFrequency) PeriodicCashFlow = 100 # Periodic future cash flows InterestRate = 0.045 # Annual interest rateĬompoundingFrequency = 4 # Compounded every quarter Print("Present value:%5.2f"%presentValue) Įxample 2: Present value of multiple future cash flows Print("Future value:%5.2f"%futureLumpSum) Print("Compounding Frequency:%d"%compoundingFrequency) Table 1: The two stages of the OFCF goes from a high growth rate (12) for four years followed by a perpetual constant 5 growth from the fifth year on. Print("Interest rate:%2.2f"%interestRate) After calculating the present value, then repeat this for all of your future net cash flows and total each result. PresentValue = np.pv(interestRate/compoundingFrequency, In order to calculate the present value of one future cash flow, this is the present value formula. Question: Calculate the present value of the cash flows shown in the table below using an interest rate of \( 10 \ \), compounded annually. InterestRate = 0.06 # Annual interest rateĬompoundingFrequency = 2 # Twice an year Calculate the present value of the cash flows shown in the table below using an interest rate of \( 10 \ \), compounded annually. If the compounding frequency is 4 per year and the annual interest rate is 5%, the quarterly interest rate is given by 0.05/4.Įxample 1: Present value of a single future cash flow To do this, the annual interest rate has to be divided by the compounding frequency.For Example, if the compounding frequency is 12 per year and the annual interest rate is 5%, the monthly interest rate is given by 0.05/12. ![]() As the interest rate is always quoted as annual interest rate while computing the present value using numpy.pv(,)the annual interest rate has to be converted to a rate for the computing period.The interest rate that is used to calculate the present value is also called as discount rate-at what rate a future payment is discounted to calculate its present value. ![]() The function numpy.pv() determines the todays value for one or more future cash flows.Calculating the present value of a sum of money is solving a time value of money problem.
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