Lets assume that fixed costs will be 5 higher than baseline values. Z 2 Cash flow in time 2. The NPV formula is somewhat complicated because it adds up all of the future cash flows from an investment discounts them by the discount rate and subtracts the initial investment.
If the difference is positive its a profitable project and if its negative then its not worthy.
NPV Cash flow 1 it initial investment. Net Present Value Formula NPV C times dfrac1-1r-nr - Initial. I f youre dealing with a longer project that involves multiple cash flows theres a slightly different net present value formula youll need to use. XNPV Rate Cash Flows Dates of Cash Flow.