TOPIC: rita's page 106

hello
can anybody help me understanding how Rita solved the formula page 106 in her seventh addition book, i did not got the idea

hello, is it about how to calculate NPV at 10% rate of interest?

yes,i couldn't understand the numbers in the table where did they come from
thank you

Hello,

The numbers in the table are just an example to show how to calculate NPV by applying the formula.

I think the most important is to keep in mind that:NPV is the TOTAL present value of your Revenues minus the TOTAL present value of your cost.over a given time period.

in the table you have the column for Income/Revenue, then you have another column for Costs.

so for this table,

NPV (from time period 0 to 3) = TOTAL (Present value of Income(year 0) +Present value of Income (year 1) +Present value of Income (year 2) +Present value of Income (year 3) ) - TOTAL ( Present value of COST (year 0) +Present value of COST (year 1) +Present value of COST (year 2) +Present value of COST (year 3) ).

Thanks

Serge