I´m doing a feasibility study to check the benefits of an investment in a certain tool. My table shows the savings and the costs in the project over 4 years. So, I´m trying to understand how to apply the Present Value and Net Present Value. I know the formulas, but i don´t know how to apply it in a real situation.
- Calculate the discount rates in every year of every item or;
- Only in the Cash Flow Line or;
- Only in the Total Savings and Total Costs line?
The table would be something like this. I applied the discount rate in the Cash Flow line (Savings-Costs). I´m considering the discount rate a given rate used by my company for this project:
And, about the NPV, should I use the Cash Flow without the discount rate applied?