Identify the equation for calculating the net present value for a stated period of time, where Ft = cash flow in period t, and i is the discount rate.
A) $ \mathrm{NPV}=\sqrt{\frac{\sum_{t=0}^{n} \mid \frac{F_{\mathrm{t}}+i}{2}}{n}} $

B) $ \mathrm{NPV}=\sum_{t-0}^{n} F_{t}(1+i)^{t} $

C) $\mathrm{NPV}=\sum_{t-0}^{n} \frac{F_{t}}{(1+i)^{t}} $

D) $ \mathrm{NPV}=\sum_{t-0}^{n} \frac{F^{t}}{i} \sqrt{(1+i)^{t}} $

Question

Identify the equation for calculating the net present value for a stated period of time, where Ft = cash flow in period t, and i is the discount rate. 
A) $ \mathrm{NPV}=\sqrt{\frac{\sum_{t=0}^{n} \mid \frac{F_{\mathrm{t}}+i}{2}}{n}} $

B) $ \mathrm{NPV}=\sum_{t-0}^{n} F_{t}(1+i)^{t} $

C) $\mathrm{NPV}=\sum_{t-0}^{n} \frac{F_{t}}{(1+i)^{t}} $

D) $ \mathrm{NPV}=\sum_{t-0}^{n} \frac{F^{t}}{i} \sqrt{(1+i)^{t}} $

Quizplus · Accepted Answer

The correct formula for calculating net present value (NPV) is C, which is the sum of cash flows discounted to the present. This formula takes into account the time value of money by dividing each cash flow by the appropriate discount factor (1+i)^t, where i is the discount rate and t is the time period. The other choices are not correct formulas for calculating NPV.

Identify the Equation for Calculating the Net Present Value for a Stated