Python numpy npv() is a financial function that is used to calculate the NPV ( Net Present Value) of the cash flow series. NPV is the present value (PV) of all cash flows (where inflows are positive cash flows, and outflows are negative), which means the NPV can be called a revenue formula minus costs.
The NPV is solved using the following equation.
Python numpy.npv(rate, value) is an inbuilt NumPy financial function that helps the user to calculate an NPV(Net Present Value) of the cash flow series. NumPy npv() is an inbuilt statistic function that can decide if an investment opportunity is a smart financial choice, or not.
The numpy npv() function can take up to two parameters:
- rate: This indicates the rate of the discount.
- values: The values of the time series of cash flows. The (fixed) period between cash flow “events” must be the same as that for which rate is given (i.e., if the rate is per year, then precisely one year for each cash flow event is understood to elapse). By definition, investments or “deposits” are negative, income or “withdrawals” are positive; values must start with the initial investment, so usually negative values are.
The npv() function returns NPV values as per the given value.
Programming to show the working of npv()
#Program to show working of NPV import numpy as np #declaring values values = [45, 50, 40, -100] rate1 = 0.50 rate2 = 0.30 rate3 = 1 #Printing NPV Values print("NPV value with rate ", rate1, " is: ", np.npv(rate1, values)) print("NPV value with rate ", rate2, " is: ", np.npv(rate2, values)) print("NPV value with rate ", rate3, " is: ", np.npv(rate3, values))
NPV value with rate 0.5 is: 66.48148148148148 NPV value with rate 0.3 is: 61.61356395084205 NPV value with rate 1 is: 67.5
In this example, we have first declared an array named ‘values’ in which we have stored all the values then we have assigned 3 ‘rate’ values. Then we have called npv() with three different rates and then printed them. NPV is calculated using the above equation.
If you want to find the NPV (Net Present Value) of a cash flow series in Python, then use the numpy npv() function.