Identify all expected future cash inflows and outflows
Choose the discount rate
Determine the time period for each cash flow
Discount each future cash flow to its present value using the formula: Present Value = Cash Flow / (1 + Discount Rate)^Time
Add all present values of cash inflows
Add all present values of cash outflows
Subtract total present value of outflows from total present value of inflows
Use the formula: NPV = Sum of Present Values of Cash Inflows – Sum of Present Values of Cash Outflows