Net present value (NPV) analysis is useful for determining
the current value of a stream of cash flows that extend out into the future. To
calculate net present value, we use the following formula:
NPV = X * [(1+r)^n - 1]/[r * (1+r)^n]
Where:
X = The amount received per period
n = The number of periods
r = The rate of return
npv = 875,000 * [(1+0.11)^7 - 1]/[0.11 * (1+0.11)^7]
= $ 7,954, 545
