Net present value template in Planning Business Modeler

The rule that you create from the Net Present Value (NPV) template calculates the net present value of a time series of cash flows.

NPV is typically used in capital budgeting or other applications that evaluate the financial returns of business investments. One important input to the NPV calculation is the interest rate at which to discount the cash flows, frequently called the cost of capital. When the amount of return exceeds the cost of capital, NPV is a positive number. Investments with a positive NPV are considered acceptable.

An NPV rule requires a range of periods during which the cash flows occur. Typically, the first period that is included in the rule scope shows when the initial investment occurs. Inflows occur during subsequent periods.

An NPV calculation across a time series of cash flows gives you a single numeric result.

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Prerequisites

Implementation

Placeholder substitution requirements

Prerequisites

The following list shows the tasks that are prerequisite for a rule that you create with this template:

  • You must create a dimension member in the Account dimension that the rule can use to hold computed values. For example, you might name this member NPV. For more information, see Create dimension members.

  • An NPV rule uses a cash flow account for input and depends on the sign of account values to calculate the correct results. To guarantee correct results, values that indicate outflow or payment values should be negative numbers, and values that indicate inflow or income should be positive numbers.

  • You must determine the discount rate that you want to use for a net present value (NPV) calculation. The discount rate is the rate over one period in the time series. For example, if the time series is annual, use an annual rate. If the time series is monthly, use a monthly rate.

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Implementation

This rule has NativeMDXScript implementation. NativeMDXScript implementations run automatically at query time. For more information, see Native code implementation.

Native MDX Scripts must be saved as inactive in the model and then enabled by your PerformancePoint Planning Global Administrator. For more information, see Security requirements for SQL and MDX rules.

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Placeholder substitution requirements

To convert the NetPresentValue template into a business rule, you must substitute actual dimension values for the placeholders in the templates. For information about how to substitute values, see Filling a placeholder in a rule template.

The following table describes the placeholder substitutions that you must make to create a business rule from this template.

Placeholder

Comment

<<[Time].[Hierarchy].[ TargetTimeMember]>>

The time period where the NPV result will be stored.

<<[Time].[Hierarchy].[ Starting Period]>>

The start period of the time series of cash flows.

<<[Time].[Hierarchy].[Ending Period]>>

The ending period of the time series of cash flows.

<<[Account].[Hierarchy].[NPV Target Account]>>

The account where the NPV results are stored.

<<[Account].[Hierarchy].[CASH FLOW Account]>>

The account that provides input cash flows to the calculation.

<<DiscountRate>>

The periodic interest rate to use in the calculation. This value must be a valid string.

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