How to Calculate NPV using Numpy (with example)

July 23, 2022

You can use the following template to calculate the NPV using Numpy:

import numpy as np
npv = np.npv(discount rate,[initial investment in negative terms, cash flow for each year separated by comma])
print (npv)

Let’s now review a simple example with the steps to calculate the NPV.

Steps to Calculate the NPV using Numpy

Step 1: Gather your data

To start, you’ll need to gather the data for the NPV calculation.

For example, let’s suppose that you have the following data about a project:

  • The initial investment is $1100
  • The project is expected to generate:
    • $300 in year-1
    • $450 in year-2
    • $800 in year-3
  • The discount rate is 5%

Step 2: Calculate the NPV using Numpy

Next, use the following template to derive the NPV:

import numpy as np
npv = np.npv(discount rate,[initial investment in negative terms, cash flow for each year separated by comma])
print (npv)

The is how the full Python code would look like in the context of our example:

import numpy as np
npv = np.npv(0.05,[-1100,300,450,800])
print (npv)

Run the code in Python and you’ll get the NPV of 284.947

Since the NPV is positive, you should consider to invest in the project.