Seemingly incorrect Planned NPV in a project, when the "Calculate NPV data" is checked.

Document ID : KB000022349
Last Modified Date : 14/02/2018
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Description:

There are times when Planned Net Present Value (NPV) that Clarity calculates automatically, may appear not to follow the documented definition:

 

Planned NPV = Planned Benefit - Planned Cost 

 

Solution:

The calculation is actually more complex than this definition, and following are a few points that need to be kept into consideration.

  1. Under the Administration menu, General Settings, System Options, please check whether the "Total Cost of Capital %" is set to something other than 0.
  2. Check the Project Financial Summary page to see if the project is using the 'Override Total Cost of Capital Rate' instead of using the system rate.
  3. If your project financials are *not* using the default system currency, then please check under Administration, Finance, Setup, Foreign Exchange Rates that the conversion rates are defined correctly, keeping in mind that there should be one conversion rate from the project currency to the system currency, and one conversion rate for the reverse. Even if the conversion rates are correct, there may be small differences (less than 1%) between the Planned NPV and the calculation of "Planned Benefit - Planned Cost", due to round-off errors.
  4. If the Benefit Cost or Planned Cost is not entered as 'Monthly' data, the application will automatically slice the data into monthly amounts for the NPV calculation. The calculations are based on the definitions of the Fiscal Time Periods associated with the selected Department Entity.
    Example:
    30,000 is entered for 5 Annual Fiscal Periods.
    The application will slice the data into daily amounts (assuming the Annual Fiscal Period has 365 days) : (30,000 / 365) = 82.19178082
    Then the monthly amounts will be computed using the daily amount for the number of days for that month.
    If the fiscal time period is using a standard monthly calendar definition, the month of May has 31 days.
    Therefore the monthly amount used in the NPV calculation is : (82.19178082 * 31) = 2547.945205

Should the above points not justify why you see a seemingly incorrect Planned NPV, please contact Technical Support for further investigation.