If you apply the net present value formula for each time period, you’d end up with $25,663.93. Since that’s a positive number, you could assume that the investment would most likely be profitable.

Calculating net present value of a lemonade stand Suppose you have the opportunity to start a lemonade stand for $100. You believe this lemonade stand will produce $20 in cash each year for the ...

The profitability index is calculated with the following formula: We calculated that the net present value of all of the lemonade stand's cash flows was $34.20. However, to calculate the ...