Financial Calculations Practical Guide with Python and R by Demirel Engin

Author:Demirel, Engin
Language: eng
Format: epub
Published: 2023-11-26T00:00:00+00:00

CHAPTER 4

20 commonly used code examples for making investment decisions in both R and Python:

1. Net Present Value (NPV)

Net present value (NPV) is used to assess how profitable a project or investment is. It calculates the difference over time between the present value of cash inflows and outflows.

# R

npv <- function(cash_flows, discount_rate) {

npv_value <- sum(cash_flows / (1 + discount_rate)^(1:length(cash_flows)))

return(npv_value)

}

# Python

def npv(cash_flows, discount_rate):

npv_value = np.sum(cash_flows / (1 + discount_rate) ** np.arange(1, len(cash_flows) + 1))

return npv_value

Example

# R

cash_flows <- c(100, 200, 300, 400, 500)

discount_rate <- 0.05

npv <- function(cash_flows, discount_rate) {

npv_value <- sum(cash_flows / (1 + discount_rate)^(1:length(cash_flows)))

return(npv_value)

}

result <- npv(cash_flows, discount_rate)

print(result)

# Python

import numpy as np

cash_flows = np.array([100, 200, 300, 400, 500])

discount_rate = 0.05

def npv(cash_flows, discount_rate):

npv_value = np.sum(cash_flows / (1 + discount_rate) ** np.arange(1, len(cash_flows) + 1))

return npv_value

result = npv(cash_flows, discount_rate)

print(result)

Output

R

[1] 1256.639

Python

1256.63934364013

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