Can any one help to get the Formula/Process on How to calculate Net Present Value(NPV) in Clarity(V13.3) Projects

Can any one help to get the Formula/Process on How to calculate Net Present Value(NPV) in Clarity(V13.3) Projects

Planned NPV = Planned Benefit - Planned Cost

You can use the above formula in the process to calculate the NPV

NJ

Also, check this -

**Cost Of Capital Parameter and NPV**https://communities.ca.com/message/18627773#18627773

NJ

### Clarity: How is the Net Present Value (NPV) being calculated?

**Document ID:**TEC508095**Last Modified Date:**2/18/2013

Hide Technical Document Details**Products**- CA PPM
- CA Governance, Risk ＆ Compliance Manager

**Releases**- CA PPM:Release:12.1
- CA PPM:Release:12.1 On Demand
- CA PPM:Release:12.1 On Premise
- CA PPM:Release:12.0
- CA PPM:Release:8.0
- CA PPM:Release:8.1

**Components**- CLARITY PPM FINANCIALS, TIME ＆ DATA MANAGEMENT

**Description:**Clarity NPV CalculationIn Clarity, the Net Prevent Value (NPV) is the difference between the sum of the Present Value of Revenue and the sum of the Present Value of Costs.In Clarity, the Return On Investment (ROI) is the ratio between the Net Present Value and the sum of the Present Value of Costs.**Solution:**Calculations within Clarity for these values are accomplished as follows:- Admin Tool > System Options > Cost of Capital %

The value that is entered in this field is an Annual Percentage Rate (APR) - Monthly Cost of Capital = Cost of Capital / 12 months (aka: comparison yield)
- Total Planned Cost:

When using only the Simple Budget page, this is the value that is entered by the end-user in the Planned Cost field.

When using Detailed Financial Planning, Planned Cost is displayed on the Simple Budget Page as read-only, it is calculated as follow:- For Clarity 8.x up to 8.1 FP03, this is the cost of the current approved budget, plus the cost of any periods in the Cost Plan "Plan of Record" (POR) that are not already included in the budget.
**For example, if the budget runs from January - March, and the POR runs from January - August, the Planned Cost is the budget amount of January - March, plus the amount of the POR periods from April - August** - For Clarity 8.1.1 and above: this is Cost Plan Plan of Record
**Note: due to a defect, the calculation of Planned Cost for 12.0.3 and 12.0.4 were reverted back to the method used for 8.x up to 8.1 FP03; this defect was resolved on 12.0.5.**

- For Clarity 8.x up to 8.1 FP03, this is the cost of the current approved budget, plus the cost of any periods in the Cost Plan "Plan of Record" (POR) that are not already included in the budget.
- Total Benefit / Revenue

When using only the Simple Budget page, this is the value that is entered by the end-user in the Planned Benefit field.

When using the Detailed Financial Planning, this is the calculated total benefit from the Benefit plan Plan of Record (POR) - The Present Value of Revenue is calculated as follows:
- Total Number of Periods (in months) = (Planned Benefit Finish date - Planned Benefit Start Date) + 1
- Revenue Per Period = Total Revenue / Total Number of Periods
- Present Value of Revenue for each Month (period) = Revenue Per period / ((100% + Monthly Cost of Capital%) raised to the power of the period number)

- Total Number of Periods (in months) = (Planned Benefit Finish date - Planned Benefit Start Date) + 1
- The Present Value of Cost is calculated as follows:
- Total Number of Periods (in months) = (Planned Cost Finish date - Planned Cost Start Date) + 1
- Cost Per Period = Total Cost / Total Number of Periods
- Present Value of Cost for each Month (period) = Cost Per period / ((100% + Monthly Cost of Capital%) raised to the power of the period number)

- Total Number of Periods (in months) = (Planned Cost Finish date - Planned Cost Start Date) + 1
- Net Present Value (NPV) = Present Value of Revenue - Present Value of Cost
- Return on Investment (ROI) = NPV / Present Value of Cost

If the date range for the Planned Costs and the date range for the planned Benefit match, the ROI will not vary when the Cost of Capital varies.

NJ

Manikanta,

We have recently written custom database functions to calculate NPV, IRR and Payback period values annually and used thse functions in processes so that process with trigger on cost / benefit plan update.

NPV:

The following is the formula for calculating NPV:

Where Ct is cash flows at each period (in my case t is in years)

r = discounted rate

t = time period (years)

Fetch the total_forecast and total_benefit amounts for your project from the below tables (total_forecast union total_benefit).

inv_investments i, fin_plans fp, fin_cost_plan_details fpd, odf_ssl_cst_dtl_cost fcst

Once you fetch cost and benefit, your select statement looks something like this.

**select****ROUND(SUM(b.net_cost/POWER((1+param_d_rate),rn)),2) NPV,****ROUND(SUM((b.net_cost-b.tax)/POWER((1+param_d_rate),rn)),2) NPV_After_Tax****from (****select****ROW_NUMBER() OVER (PARTITION BY y.project_id ORDER BY y.plan_year ASC) rn,****SUM(q.cost) total_forecast,****SUM(q.benefit) total_benefit,****(SUM(q.benefit) - SUM(q.cost)) net_cost****)**param_d_rate is noting but our r (discounted rate).

rn is number of years. ex: if your cost plan starts at 2014 and ends at 2016 and benefit plan starts at 2015 and ends at 2017 then rn is:

Years RN

2014 1

2015 2

2016 3

2017 4

Hoping the provided information will help.

Regards,

Manas

Thanks for your Response NJ and Manas.

The requirement is , Customer has asked us the Logic behind the NPV Calculation, We have same Formula which NJ has Posted above. But with that we could get unmatched values.

@NJ,

The attachmnet contains all the Financial details of a test Project, could you please help me to calculates.

Many Thanks for your quick help

FYI the Cost of Capital % is set as 5% in system.

Thanks,

Mani

- 1 person found this helpful
Don't forget to include your 'Initial Investment' amount. this is a new attribute introduced in v13 that is included in the computations.

Attached is the calculation I could get

NJ