by Jackie Nguyen
(Orange, CA, US)
My loan modification was declined due to NEGATIVE NET PRESENT VALUE. I do not understand nor anyone from Wells Fargo can explain to me how the Treasury Department come up with this result and decline my loan mod application. Wells Fargo is prepared to give me a loan mod at 3.5% interest rate, but when they submitted to the Treasury, the Government declined it due to the reason above. Can you help me to understand what number or criteria used to do this?
Is it possible to apply NPV to a project with cash outlays over the first two years and incremental cash flows begin in year three?
Comments for NPV For A Project With Multiple Cash Outlays




by Anonymous
In an instance where cash flows are zero for a number of years are there any special considerations?
Example:
Initial Outlay (100,000)
Year 1 0
Year 2 0
Year 3 0
Year 4 0
Year 5 200,000
Excel returns an answer of 18,690.27 but I'm think that its wrong any advice.
Answer
There are no special considerations for this NPV calculation.
You did not provide a discount interest rate, but a small calculation yields 11%.
If you put your numbers into my NPV Calculator calc you will get the same answer after rounding.
Now if you don't trust electronic answers we can try the precomputer method.
The formula for the NPV calculation would be:
NPV = Po + P5/(1+i)^5
= 100k + 200k / (1.11^5)
= 100k + 200k / 1.685058155
= 18,690.27
You can go here to use a NPV Calculator calc.
Dee Reavis
by Mario
(Raleigh, NC)
How do you calculate NPV for cash flows that "last forever"?
Answer
This is called an annuity in perpetuity. The equation for NPV reduces to NPV=(Cash Flow)/i as the cash flows approach zero. This of course assume that the cash flows are a constant amount. So if you have a cash flow of $1,000 into perpetuity with a discount rate of 10% then the NPV would be $10,000. Calculation for NPV