sntoo19 Understand the Net Present Value NPV - Planning Engineer Est Have any question? & (00) 201277767728 infoplanningengincerinet Login | Profile PLANNING ENGINEER PROJECT MANAGEMENT Home Blog__—_—Project Management —_ Understand the Net Present Value NPV. Understand the Net Present Value NPV Posted by Categories Date Comments MANY ISMAIL, MSC, PMP. PROJECT MANAGEMENT JULY 11,2014 0. COMMENT -ntps:iiplanningengineernet/understang-the-netpresentvalue-npu/?foclis=IWwAROBYHXIZ-HaJDinfGJ tbzpmkbXZ1ErMcHGxbEOSFOVIVGIGIOS.... 1/13sntoo19 Understand the Net Present Value NPV - Planning Engineer Est Project A Net Present Value (NPV) Calculations [_dicountrte | us] Comoratetarrate | 30% _] Capital investments €M Euro (Co) {€ 6.90) Cash Flow (Ct) Year 1 (€ 4.10) [Cash Flow (Ct) Year 2 €2.25 [Cash Flow (Ct) Year 3 €4.65 Cash Flow (Ct) Year 4 €850 [Cash Flow (Ct) Year 5 € 10.27 [Cash Flow (Ct) Year 6 €10.27 (Cash Flow (Ct) Year 7 € 10.27 [Cash Flow (Ct) Year 8 € 10.27 [Cash Flow (Ct) Year 9 €10.27 Cash Flow (Ct) Year 10 € 10.27 [Cash Flow (Ct) Year 11 € 10.27 [Cash Flow (Ct) Year 12 €10.27 [Cash Flow (Ct) Year 13 € 10.27 Cash Flow (Ct) Year14 € 10.27 [Cash Flow (Ct) Year 15 € 10.27 x C, NPV =p2-t- Btary Net Present Value (NPV) € 42.22 Net Present Value (NPV) After Tax deduction £2 Which is better, to have 100$ now or to have 110$ after one year? In this article | will explain what the time value of money is, and how to take your financial decisions based on this simple calculations Future value of Money! 1008 today does not equal to 1008 after one year: This is because the money lose some of its value each year. Furthermore, you lose an opportunity to invest your 1008 for this year, For example, if you deposited your 1008 ina bank, you would withdraw them 110S by the end of the year, This concept is called time value of money, and by understanding this concept you would make better financial decision to yourself, or even to your company. The amount of lost investment, and value losses is called discount percentage, -ntps:ifplanningengineernet/understang-the-netpresentvalue-npu/?foclis=IWwAROBYHXIZ-HaJDinfGJtbzpmkbXZ1ErcHGxbEOSFOVIVGIGIOS.... 2/13sntoo19 Understand the Net Present Value NPV - Planning Engineer Est How to calculate future money? ‘The Net Present Value (NPV) takes into account the value of the dollar today compared to the value of the dollar in the future, which is why it is a very important value to look at before making any large financial decisions. The formula of NPV is below: at & NPV = 2a Ct= net cash inflow during the period Co= initial investment iscount rate, and t= number of time periods Simple right? Ob, just kidding, Microsoft Excel make it easy with the function NPV watch this video [embedplusvideo height="400" width="780" edithink—"http:/?bitLy/InjbrPY” standard="http://www-youtube.com/v/s2ZZFjC2UBU?f5=1" vars" ytid-s2ZZF}C2UBU&width=780&height=400&start-& stop=8rs-w&hd-0&autoplay=O&react=1 &chapters= id="ep1061" /] Applications of NPV: say we have four projects, which one is better for your organization? Cash Flow Estimate for Project A (all figures are in €M Euro): Cash Flow Item Year1 |Year2 |Year3 |Year4 | Years 5-15 Yearly Cash Flow -€4.10 |€2.25 | €4.65 | €8.50 | €10.27 Capital Investments 6.90 Cash Flow Estimate for Project B (all figures are Cash Flow Item Year |Year2 |Year3 | Year4 | Years 5-15 Yearly Cash Flow -€110 |€150 |€336 e450 | €6.40 Capital Investments | 4.10 ntpsifplanningengineernet/understand:-he-netpresentva apy! foclid=WwARODYHXIZ-Ha Dini. TbzpmkOXZ Er4cHGxbEOSFDVIVGIGIOS.. 3/13sntoo19 Understand the Net Present Va NPV - Planning Engineer Est. Cash Flow Estimate for Project C (all figures are in €M Euro): Cash Flow Item Year |Year2 |Year3 |Year4 | Years 5-15 Yearly Cash Flow -€1.70 |€180 |€2.30 |€4.30 | €6.30 Capital Investments | 4.70 Cash Flow Estimate for Project D (all figures are in €M Euro): Cash Flow Item Year |Year2 |Year3 /Year4 —_| Years 5-15 Yearly Cash Flow -€5,10 |€210 |€6.00 |€1200 |€13.50 Capital Investments | 8.2 ‘The following is the calculation of the NPV for each project: _ntps:ifplanningengineernet/understand-the-netpresentvalue-np?focld=IwAROBYHXIZ-HaJDinfGJ tbzpmkbXZ 1EricHGxdEOSFOVAVGIE}OS. anasntoo19 Understand the Net Prasant Value NPV - Planning Enginear Est. Project A Net Present Value (NPV) Calculations 11% Capital Investments €M Euro (Co) (Cash Flow (Ct) Year 1 (Cash Flow (Ct) Year 2 [Cash Flow (Ct) Year 3 (Cash Flow (Ct) Year 4 Cash Flow (Ct) Year 5 [Cash Flow (Ct) Year 6 (Cash Flow (Ct) Year 7 Cash Flow (Ct) Year 8 [Cash Flow (Ct) Year 9 [Cash Flow (Ct) Year 10 [Cash Flow (Ct) Year 11 [Cash Flow (Ct) Year12 [Cash Flow (Ct) Year 13 [Cash Flow (Ct) Year 14 [Cash Flow (Ct) Year 15 Net Present Value (NPV) ‘Net Present Value (NPV) After Tax deduction Corporatetaxrate [| 30% _ | {€ 6.90) (€4.10) €2.25 €4.65 €850 € 10.27 € 10.27 € 10.27 € 10.27 € 10.27 € 10.27 € 10.27 € 10.27 € 10.27 € 10.27 € 10.27 €42.22 € 29.55 hitpsplanningengineer neliunderstand-the-net-present-value-npyfoclid= WAROBYHXIZ-HaJDinfG¥lbzpmkbXZ 1Er4cHGXtEOSFDVIVGIBJOS. 53sntoo19 Understand the Net Present Value NPV - Planning Engineer Est Net Present Value (NPV) Calculations Discount rate 11% Corporate taxrate | 30% | Capital Investments €M Euro (Co) (€4.10) [Cash Flow (Ct) Year 1 (€1.10) [Cash Flow (Ct) Year 2 €150 [Cash Flow (Ct) Year 3 €3.36 (Cash Flow (Ct) Year 4 €450 [Cash Flow (Ct) Year 5 €640 [Cash Flow (Ct) Year 6 €640 [Cash Flow (Ct) Year 7, €640 |Cash Flow (Ct) Year 8 €640 [Cash Flow (Ct) Year 9 €640 [Cash Flow (Ct) Year 10 €640 Cash Flow (Ct) Year11 €640 [Cash Flow (Ct) Year 12 €640 (Cash Flow (Ct) Year 13 €640 Cash Flow (Ct) Year 14 €640 ‘Cash Flow (Ct) Year 15 €640 Net Present Value (NPV) €27.71 ‘Net Present Value (NPV) = _ntps:ifplanningengineernet/understand-the-netpresentvalue-np?focld=IwAROBYHXIZ-HaJDinfGJ tbzpmkbXZ 1EricHGxdEOSFOVAVGIE}OS. anssnto019 ‘Net Present Value (NPV) Calculations Discountrate [| 11% | Understand the Net Prasant Value NPV - Planning Enginear Est. Capital Investments €M Euro (Co) [Cash Flow (Ct) Year 1 [Cash Flow (Ct) Year 2 [Cash Flow (Ct) Year 3 [Cash Flow (Ct) Year 4 [Cash Flow (Ct) Year 5 [Cash Flow (Ct) Year 6 [Cash Flow (Ct) Year 7 Cash Flow (Ct) Year 8 Cash Flow (Ct) Year 9 [Cash Flow (Ct) Year 10 [Cash Flow (Ct) Year 11 [Cash Flow (Ct) Year 12 [Cash Flow (Ct) Year 13 [Cash Flow (Ct) Year 14 [Cash Flow (Ct) Year15 Net Present Value (NPV) Net Present Value (NPV) After Tax deduction _ntps:ifplanningengineernet/understand-the-netpresentvalue-np?focld=IwAROBYHXIZ-HaJDinfGJ tbzpmkbXZ 1EricHGxdEOSFOVAVGIE}OS. Project C Corporate taxrate | 30% | (€4.70) (€1.70) €180 €230 €4.30 €6.30 €6.30 €6.30 €6.30 €6.30 €6.30 €6.30 €6.30 €6.30 €6.30 €6.30 € 25.50 €17.85 73snroo19 Net Present Value (NPV) Calculations Discountrate | 11% | Understand the Net Prasant Value NPV - Planning Enginear Est Corporate taxrate | 30% | Capital Investments €M Euro (Co) (€ 8.20) [Cash Flow (Ct) Year 1 (€5.10) (Cash Flow (Ct) Year 2 €210 [Cash Flow (Ct) Year 3 €6.00 (Cash Flow (Ct) Year 4 €12.00 (Cash Flow (Ct) Year 5 € 13.50 (Cash Flow (Ct) Year 6 €13.50 (Cash Flow (Ct) Year 7 € 13.50 [Cash Flow (Ct) Year 8 €13.50 (Cash Flow (Ct) Year 9 €13.50 (Cash Flow (Ct) Year 10 €13.50 Cash Flow (Ct) Year 11 €13.50 Cash Flow (Ct) Year 12 € 13.50 (Cash Flow (Ct) Year 13 € 13.50 (Cash Flow (Ct) Year 14 €13.50 (Cash Flow (Ct) Year 15 € 13.50 Net Present Value (NPV) After Tax deduction poe Download the Excel sheet to calculate any NPV:NPV This concept is applicable to your life situations as well, you make take decisions to sell your car with x amount in cash or x+y amount in installments where ‘Tag: Net Present Value, NPV _ntps:ifplanningengineernet/understand-the-netpresentvalue-np?focld=IwAROBYHXIZ-HaJDinfGJ tbzpmkbXZ 1EricHGxdEOSFOVAVGIE}OS. culated from the NPV. Share: @) (c) anssntoo19 Understand the Net Present Value NPV - Planning Enginear Est Hany Ismail, MSC, PMP Hany Ismael is the founder and CEO of Planning Engineer Est. in Egypt. He has started his career bac in 2003 as a site engineer, technical office engineer, planning engineer, planning manager, and finally planning department manager where he has been involved in several mega construction projects in Egypt and Saudi Arabia. In 2016, he established his own company in Egypt “Planning Engineer Est.” Hany gained his MSc degree in project management from Liverpool University-UK 2013-2016, PMP. certified from PMI-USA 2010, and BSc Civil Engineer Tanta Universi Egypt 2003. Hany provided more than 3,500 hours of planning and project management training on his website planningengineer.net, YouTube channel, and offline courses since 2011. He enjoys teaching project ‘management in simple and practical way, and he developed several planning tools, techniques and Previous post Next post ‘The greatest pleasure in life Stepping outside of the box uly 11,2014 Buly 18, 2014 YOU MAY ALSO LIKE ntpsifplanningengineer nefunderstand-the-net present ue-npwfocld=IwAROBYHXiZ-HaJDinfG ozpmkbXZ1EM4CHGXBEOSFDVIVGIB)OS.... 9/13sntoo19 Understand the Net Present Value NPV - Planning Engineer Est Difference between Claim Specialist Power BI is the next level of data Planned Spent and Delay Analyst analytics and visualization used to monito 3 March, 2019 20 February, 2019 7 February, 2019 LEAVE A REPLY You must be logged in to post a comment, Connect with: Login with Fac G+ Login with Goog y ith Twitt in Login with LinkedIn No products in the cart Search Q PLANNING COURSES Monitoring and Controlling Using Power Bi and Primavera P6 -PMC $299.00 Planning Advanced Package- 3 Professional Courses and Primavera 50 Tips $500.00 ntpsifplanningengineer nefunderstand-the-net present ue-npw focld=IwAROBYHXIZ-HaJDinfG bzpmkbXZ1EM4CHGXBEOSFDVIVGIB)O.... 10/13sntop019 Understand the Net Present Value NPV - Planning Engineer Est ; Data Management and Planning Reporting Skills $200.00 Arabic Planning Course for Non Planners $50.00 GREENLAND PLANNING ENGINEER REQUIRED — UMM AL QUWAIN UAE GREENLAND FULL TIME mg, BLSOMAN YESS LOOKING FOR A PLANNING ENGINEER WITH PRIMAVERA P6 SAUDI ARABIA, AL SAMAMAT INDUSTRIAL SERVICES FULL TIME EGYPT W UMEIRAI TRADINGECONTRACTING s. _ntps:ifplanningengineernet/understan:-the-netpresentvalue-npu/?foclis=IWwAROBYHXIZ-HaJDinfGJtbzpmkbXZ1ErMcHGxbEOSFOVIVGIB)O... 11/13sntoo19 Understand the Net Present Value NPV - Planning Engineer Est WE ARE JUMEIRAH EGYPT TRADING & CONTRACTING COMPANY LOOKING FOR PLANNING ENGINEER. 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