The formula that we use on our project is as follows:
Legend: PV = Price N = Rental term i = Interest rate A = 1
Formula:
NPV = PV
----------- (divide)
1
[ 1 - -------- + 1 ]
(1+i)N-A
----------- (divide)
i
So if:
PV = 1000 N = 36 months i = interest rate per month = 10% / 12 = 0.833% A= 1
Then the NPV calc will look like this:
NPV = 1000
-----------------
1
[ 1 - ------------- + 1 ]
(1+0.833%)36-1
-----------------
0.833%
= 1000
--------
1
[ 1 - ------- + 1 ]
1.33704
-------
0.833%
= 1000
--------
[ 1 - 0.747921 + 1 ]
--------
0.833%
= 1000
--------
[ 0.252079 +1 ]
--------
0.833%
= 1000
--------
[ 30.2495 +1 ]
= 1000
--------
[ 31.2495 ]
NPV = 32.00
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