A:

A. The amount of interest expected to be generated each year
B. The time horizon – how long the investment is expected to be held in the portfolio

C. The interest rate to be used for discounting the annual payments to be received

D. The amount needed at the end of the holding period

to calculate net present value, the discount rate, cash flows and time horizon are all required. The amount desired at the end of the period is not part of the equation.

RELATED FAQS
1. ### How do you use a financial calculator to determine present value?

Learn how to utilize a financial calculator to calculate present value. Understand the necessary data, why it is important ... Read Answer >>
2. ### The real rate of return is the amount of interest earned over and above the:

a. discount rate. b. tax rate. c. inflation rate. d. risk-free rate of return. Answer: C Since the real rate of return measures ... Read Answer >>
3. ### What is the difference between the cost of capital and the discount rate?

Learn about the differences between the cost of capital and the discount rate as they relate to estimating a required return ... Read Answer >>
4. ### When and why should the terminal value be discounted?

Find out why investors use the terminal value, why the terminal value is discounted to the present day, and how it's related ... Read Answer >>
5. ### How do I calculate free, discounted and operational cash flow in Excel?

Take a quick look at how you can calculate a company's operating cash flow, free cash flow and discounted cash flows using ... Read Answer >>
Related Articles
1. Investing

### Discounting With The Discount Rate

The discount rate is the interest rate you need to earn on a given amount of money today to end up with a given amount of money in the future. Let's say you need \$1,000 one year from now to go ...
2. Investing

### Understanding the Time Value of Money

Find out why time really is money by learning to calculate present and future value.

### Calculating Net Present Value at Different Points Using Excel

Calculating the net present value (NPV) of your investment projects using Excel.

### A Guide on the Risk-Adjusted Discount Rate

When a project or investment faces higher amounts of risk or uncertainty, it may be appropriate to utilize the risk-adjusted discount rate.
5. Investing

### Calculating the Present Value of an Annuity

The present value of an annuity is the current, lump sum value of periodic future payments as calculated using a specific rate.

### Capital Budgeting: Which is Better, IRR or NPV?

Using internal rate of return and net present value for capital budgeting evaluations often end in the same result. But there are times when using NPV to discount cash flows makes more sense.
7. Retirement

### How to Calculate the Value of Annuities

Here's everything you need to account for when calculating the present and future value of annuities.
8. Managing Wealth

### Valuation Of A Preferred Stock

To find the value of the preferred stock, each future dividend payment needs to be discounted back to the present, and then added together.
9. Investing

### Calculating Present Value Interest Factor

The present value interest factor is a number that makes it easier to calculate the present value of a payment or value to be received in the future.
RELATED TERMS
1. ### Present Value - PV

The current worth of a future sum of money or stream of cash ...
2. ### Investment Horizon

The total length of time that an investor expects to hold a security ...
3. ### Discount Rate

The interest rate charged to commercial banks and other depository ...
4. ### Time Horizon

The length of time over which an investment is made or held before ...
5. ### Rate Of Return

The gain or loss on an investment over a specified period, expressed ...
6. ### 1%/10 net 30

A way of providing cash discounts on purchases. It means that ...
Hot Definitions
1. ### Blue Chip

A blue chip is a nationally recognized, well-established, and financially sound company.
2. ### Payback Period

The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
3. ### Collateral Value

The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal ...
4. ### Fiduciary

A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
5. ### Current Account

The difference between a nation’s savings and its investment. The current account is defined as the sum of goods and services ...
6. ### Liability

Liabilities are defined as a company's legal debts or obligations that arise during the course of business operations.