Net present value of an investment that generates the same cash flow every year.
VAN = −I + F × (1 − (1 + r)^−n) ÷ r
What each letter means
- I: Initial investment
- F: Annual net cash flow
- r: Discount rate
- n: Years
An example
With I = €12,000, F = €4,000, r = 8%, n = 4 years: NPV = €1,248.51.