| Year | Cash Flow | Discount Factor | Present Value | Cumulative PV |
|---|---|---|---|---|
| 0 | -$100,000 | 1.0000 | -$100,000 | -$100,000 |
| 1 | $30,000 | 0.9091 | $27,273 | -$72,727 |
| 2 | $35,000 | 0.8264 | $28,926 | -$43,802 |
| 3 | $40,000 | 0.7513 | $30,053 | -$13,749 |
| 4 | $35,000 | 0.6830 | $23,905 | $10,156 |
| 5 | $30,000 | 0.6209 | $18,628 | $28,784 |
C₀ = Initial investment · Cₜ = Cash flow in year t · r = Discount rate · t = Year
A positive NPV means the investment earns more than the required rate of return.