Calculate NPV without losing the story
Compute and explain a simple NPV result for a business-case recommendation.
An automation proposal costs $260,000 now and is expected to generate $120,000 in annual net benefits for three years. Finance asks for the NPV at an 8 percent discount rate. Discount future net benefits, subtract the initial cost, then interpret the result beside risk and strategic fit. The common shortcut is to total three years of benefits as $360,000, subtract $260,000, and call the case $100,000 positive. That ignores timing and makes the value look cleaner than it is. Step 1 Year 0 cost = -$260,000. Costs paid now are already in today's dollars, so no discounting is needed for…
Sign up free — one personalized lesson every day, matched to your role and goals.
Already have an account? Sign in