Updated: 5 August 2010

Use ENPV_q to calculate the net present value of an investment based on a series of periodic cash flows and a discount rate. ENPV_q is closely related to NPV_q function.

If n is the number of cash flows in the list of values, the formula for NPV is:

Whereas the formula for ENPV is:

Where

N = Number of cashflows

Values = Cashflow amounts

Rate = Discount rate

SELECT [westclintech].[wct].[ENPV_q] (

<@Rate, float,>

,<@Cashflows_RangeQuery, nvarchar(4000),>)

the rate to be used for discounting the cash flows in calculating the net present value. *@Rate* is an expression of type **float** or of a type that can be implicitly converted to **float**.

a select statement, as text, which specifies the cash flow values to be used in the net present value calculation.

float

Â· For the results to be meaningful, the cash flows should be equally spaced with respect to time and occur at the end of each period.

Â· Order matters, so make sure that your SELECT statement uses a meaningful index or specify the order of the cash flows explicitly in the WHERE clause.

Â· It is important to be consistent with the units for *@Rate* and *@Nper*. For example if payments are to be paid monthly, then *@Rate* should be the monthly rate, which can be specified as the annual rate divided by 12. If payments are made quarterly, divide the annual rate by 4. If payments are made semi-annually, divide the annual rate by 2.

Â· Funds that are paid should be represented with negative numbers. Funds that are received should be represented as positive numbers.

Â· The ENPV_q function differs from the NPV_q function in that the ENPV_q function calculates the discount rate as (1+rate)^{i }for *i* equal zero to *n*-1, where *n* is the number of items in the calculation. NPV function calculates the discount rate as (1+rate)^{i }for *i* equal one to *n*, where *n* is the number of items in the calculation. The ENPV result divided by the NPV result should be equal to 1 plus the discount rate

Create a table to store cash flow projections, by year, for a variety of projects:

CREATE TABLE [dbo].[cf1](

[proj_no] [float] NOT NULL,

[period] [float] NOT NULL,

[cf_amt] [float] NOT NULL,

CONSTRAINT [PK_cf1] PRIMARY KEY CLUSTERED

(

[proj_no] ASC,

[period] ASC

)WITH (PAD_INDEX = OFF, STATISTICS_NORECOMPUTE = OFF, IGNORE_DUP_KEY = OFF, ALLOW_ROW_LOCKS = ON, ALLOW_PAGE_LOCKS = ON) ON [PRIMARY]

) ON [PRIMARY]

Insert the data for 3 projects into the table.

INSERT INTO cf1 VALUES(1,1,-25000)

INSERT INTO cf1 VALUES(1,2,5000)

INSERT INTO cf1 VALUES(1,3,10000)

INSERT INTO cf1 VALUES(1,4,15000)

INSERT INTO cf1 VALUES(1,5,20000)

INSERT INTO cf1 VALUES(1,6,25000)

INSERT INTO cf1 VALUES(2,1,-25000)

INSERT INTO cf1 VALUES(2,2,25000)

INSERT INTO cf1 VALUES(2,3,10000)

INSERT INTO cf1 VALUES(2,4,15000)

INSERT INTO cf1 VALUES(2,5,10000)

INSERT INTO cf1 VALUES(2,6,5000)

INSERT INTO cf1 VALUES(3,1,-25000)

INSERT INTO cf1 VALUES(3,2,5000)

INSERT INTO cf1 VALUES(3,3,25000)

INSERT INTO cf1 VALUES(3,4,10000)

INSERT INTO cf1 VALUES(3,5,20000)

INSERT INTO cf1 VALUES(3,6,15000)

Enter a SELECT statement to calculate the NPV for the 3 projects so as to compare the results, assuming a 10% rate:

select d.proj_no

,wct.ENPV_q(.10

,'SELECT c.cf_amt

from cf1 c

where c.proj_no = ' + convert(char, d.proj_no)) as NPV

from cf1 d

group by d.proj_no

Here is the result set

proj_no NPV

---------------------- ----------------------

1 28262.9415526758

2 27196.1987196602

3 30693.8485324524

(3 row(s) affected)