Formula

Sasi Reddy

13y6.8kLearn iOS Programming

7 Replies

Know the answer? Post it — somebody with the same question will find it here.

Vulpes13y ago
Accepted answer
Sorry, I mis-read the question. Reading it again, I see that you want to calculate 'r' given 'npv' rather than the other way around.

It's not possible to solve the formula directly for 'r' so you have to use an iterative method which, starting from a guess, (hopefully) converges to an answer after a reasonable number of iterations.

Although there isn't a method to do this in the .NET framework's Math class, there is a method in VB.NET's Financial Module called IRR which is documented here:

http://msdn.microsoft.com/en-US/library/w8h9s5b4(v=vs.90).aspx

This method can be used from C# by first adding a reference to Microsoft.VisualBasic.dll to your project and then using code such as the following.

For convenience, I've used the results of my first post so we can work backwards to obtain r = 0.1. Notice that npv needs to included (negatively) as the first element of the array and also that the first cash flow (at time 0) needs to be added to this as it's paid in advance rather than at the end of the first year as IRR assumes:

using System;
using VBF = Microsoft.VisualBasic.Financial;

class Program
{
static void Main()
{

double npv = 8.30277986476333;
double[] C = {-npv + 1, 2, 3, 4}; // put npv as negative first element and add 1st C/F
double r = VBF.IRR(ref C);
Console.WriteLine("Interest rate is {0} per unit p.a.", r);
Console.ReadKey();
}
}

As expected the output is:

Interest rate is 0.1 per unit p.a.
+1
Vulpes12y ago
The formula which Sasi gave assumes that the cash flows are paid annually in advance whereas the online calculators you linked to assume they're paid annually in arrears.

So, if we take the first online calculator, if you put in the following:

Discount Rate 10%
Initial Invest Amount 0
Number of Years 3

Cash flows:
Year 1 = 2
Year 2 = 3
Year 3 = 4

then the net present value is 7.31.

However, you then need to add to this the first cash flow of 1 paid annually in advance (which therefore has a present value of 1) giving a total of 8.31 which is close to the 'exact' answer of 8.30277986476333 we obtained above.
0
Sumit Kumawat12y ago
Hi Vulpes

i gone through below link
http://msdn.microsoft.com/en-US/library/w8h9s5b4(v=vs.90).aspx

but when i calculate the NPV from some online NPV calculator with same values (given in the above link) the results are different.
below are link where i calculate the NPV
http://easycalculation.com/finance/net-present-value.php
http://www.datadynamica.com/irr.asp
0
Vulpes12y ago
I don't understand what you mean as the code is already in C#.

Admittedly, we're using the function IRR from the VB runtime library but there's nothing wrong with that - it's all .NET :)
0
Sumit Kumawat12y ago
Hi vulpes,
Thanx for sharing this link...
But i want this in C# so it will be good for me if u can give me code for calculating NPV in c#.
Thanx in advance :)
0
Sasi Reddy13y ago
Hi,

That was working fine for me and thank you so much .The link was very useful for me
http://msdn.microsoft.com/en-US/library/w8h9s5b4(v=vs.90).aspx
0
Vulpes13y ago
Try this:

using System;

class Program
{
static void Main()
{
double[] C = {1, 2, 3, 4};
double r = 0.1;
double npv = NPV(C, r);
Console.WriteLine("Net present value is {0}", npv);
Console.ReadKey();
}

static double NPV(double[] C, double r)
{
double sum = 0.0;
int N = C.Length - 1;

for(int n = 0; n <= N; n++)
{
sum += C[n] / Math.Pow(1 + r, n);
}

return sum;
}
}

The output is:

Net present value is 8.30277986476333
0