Discounting cash flows
You can use numpy's net present value function numpy.npv(rate, values) to calculate the net present value of a series of cash flows. You can create these cash flows by using a numpy.array([...]) of values.
Compute the NPV of the same cash flows from the following project, but assuming different discount rates:
| Year | Cash Flow |
|---|---|
| 1 | $100 |
| 2 | $100 |
| 3 | $100 |
| 4 | $100 |
| 5 | $100 |
This is a part of the course
“Introduction to Financial Concepts in Python”
Exercise instructions
- Calculate the net present value of the investment with
cash_flowsat a discount rate of 3% per year, and assign it toinvestment_1. - Repeat the process with a discount rate of 5% per year, and assign it to
investment_2. - Repeat the process with a discount rate of 7% per year, and assign it to
investment_3.
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
import numpy as np
# Predefined array of cash flows
cash_flows = np.array([100, 100, 100, 100, 100])
# Calculate investment_1
investment_1 = np.npv(rate=____, values=____)
print("Investment 1's net present value is $" + str(round(investment_1, 2)) + " in today's dollars")
# Calculate investment_2
investment_2 = np.npv(rate=____, values=____)
print("Investment 2's net present value is $" + str(round(investment_2, 2)) + " in today's dollars")
# Calculate investment_3
investment_3 = np.npv(rate=____, values=____)
print("Investment 3's net present value is $" + str(round(investment_3, 2)) + " in today's dollars")This exercise is part of the course
Introduction to Financial Concepts in Python
Using Python and NumPy, learn the most fundamental financial concepts.
Learn about fundamental financial concepts like the time value of money, growth and rate of return, discount factors, depreciation, and inflation.
Exercise 1: Fundamental financial conceptsExercise 2: Growth and rate of returnExercise 3: Compound interestExercise 4: Discount factors and depreciationExercise 5: Present and future valueExercise 6: Present valueExercise 7: Future valueExercise 8: Adjusting future values for inflationExercise 9: Net present value and cash flowsExercise 10: Discounting cash flowsExercise 11: Initial project costsExercise 12: Diminishing cash flowsWhat is DataCamp?
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