DOC: Add warning to NPV function #14508
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``np.npv`` calculates the present value of a series of cashflows starting in the present (t=0). Another common definition of NPV uses the future cashflows i.e. starting at the end of the first period. The difference in definition can lead to confusion for users moving between NumPy and other projects [1] and adds complexity for maintainers [2]. This commit adds a warning to the ``npv`` function's documentation and adds an example on how to find the npv of a project using the alternate definition. [1] https://github.com/numpy/numpy/issue/10877 [2] #3346
The internal rate of return (irr) is defined as the rate of return required for the net present values of a series of cashflows to be zero. i.e the lowest rate of return required for a project to break even. This is currently checked by refering to the example output from the ``irr`` and ``npv`` function documentation. This commit adds a test to confirm the identity holds.
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@Kai-Striega its here: https://9284-908607-gh.circle-artifacts.com/0/home/circleci/repo/doc/build/html/index.html looks good though. |
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@Kai-Striega, thanks for your time and effort! Yup, that would make the behaviour pretty clear! 👍 |
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OK, it reads fine to me as well. I will trust @Kai-Striega and @joelowj that the finance makes sense :). Thanks both of you! Honestly did not know there was a warnings section and not just a tag, but may as well use it since it renders right. |
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My understanding is that the |
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closes #10877
This PR:
Clarifies that
np.npvcalculates the net present value (NPV) of a series of cashflows (at the start of each period) , rather than of a series of future cashflows (at the end of each period).Adds an example splitting the cashflows into an initial investment and future cashflows.
Refactors the NPV-IRR congruence check as a formal example.
@joelowj do you think these changes would have helped you / would be clearer for someone like you to understand.
@seberg I don't think I have access to the built documentation, would you confirm that it was formatted correctly?