Example of a Future Project
For example, consider a four-month future project that has forecast benefits and costs as shown in Example of a Future Project and an annual discount rate of 6%, equivalent to a monthly rate of 0.5% or .005.
As of March 2012, two months before the project starts, the total NPV is the sum of the following amounts (rounding off to the nearest dollar):
$10,000 / (1.005) 2 = $9,901 for May
$30,000 / (1.005) 3 = $29,554 for June
$100,000 / (1.005) 4 = $98,025 for July
$135,000 / (1.005) 5 = $131,675 for August
For this example, the total NPV is $269,155.
The total forecast nominal return for the four project months is $275,000.