There are multiple uses for the discount factor. =XNPV(8%, Sum of Discounted Cash Flow, Sum of Time Period)ĭiscount Factor = 540,803 Relevance and Uses of Discount Factor Formula Now, please refer to Excel for the calculation. Net Present Value is calculated using the formula given below Discount factor for 7th month = 1 / (1 * (1 + 8%) ^ 6.5) = 0.61ĭiscount Cash Flow is calculated using the formula given below.We have seen the calculation of the discount factor in the above formula, but here we have to calculate time by subtracting the date and get cumulative time in days and use the same for calculation.ĭiscount Factor is calculated using the formula given below We have to calculate the net present value with manual formula and Excel function and discount factor for a period of 7 months, the discount rate for the same is 8%, and the undiscounted cash flow is $100,000. Let us see another example to understand functions. Net present value can also be calculated by Excel’s NPV() and XNPV() functions. DCF for 7th month = 100,000 * 0.58 = 58,349įormula to calculate Net Present Value is as below:.Let us calculate DCF for 7 months period.įormula to calculate Discount Cash Flow is as below:ĭiscounted Cash Flow = Undiscounted Cash Flow * Discount Factor Let us calculate the discount factor for 7 months. We have to calculate the net present value and discount factor for a period of 7 months, the discount rate for the same is 8%, and the undiscounted cash flow is $100,000. Now, let us take another example to understand the discount factor formula better. Discount Factor = 1 / (1 * (1 + Discount Rate) Period Number)
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |