Time for action – calculating the net present value

We will calculate the net present value for a randomly generated cash flow series. Perform the following steps to do so:

  1. Generate five random values for the cash flow series. Insert -100 as the start value.
    cashflows = np.random.randint(100, size=5)
cashflows = np.insert(cashflows, 0, -100)
print "Cashflows", cashflows

    The cash flows would be shown as follows:

    Cashflows [-100   38   48   90   17   36]
  2. Call the npv function to calculate the net present value from the cash flow series we generated in the previous step. Use a rate of three percent.
    print "Net present value", np.npv(0.03, cashflows)

    The net present value would be shown as follows:

    Net present value 107.435682443

What just happened?

We computed the net present value from a randomly generated cash flow series with the NumPy npv function (see netpresentvalue.py).

import numpy as np

cashflows = np.random.randint(100, size=5)
cashflows = np.insert(cashflows, 0, -100)
print "Cashflows", cashflows

print "Net present value", np.npv(0.03, cashflows)
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