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43 lines
1.4 KiB
Python
43 lines
1.4 KiB
Python
"""
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Reference: https://www.investopedia.com/terms/p/presentvalue.asp
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An algorithm that calculates the present value of a stream of yearly cash flows given...
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1. The discount rate (as a decimal, not a percent)
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2. An array of cash flows, with the index of the cash flow being the associated year
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Note: This algorithm assumes that cash flows are paid at the end of the specified year
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"""
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def present_value(discount_rate: float, cash_flows: list[float]) -> float:
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"""
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>>> present_value(0.13, [10, 20.70, -293, 297])
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4.69
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>>> present_value(0.07, [-109129.39, 30923.23, 15098.93, 29734,39])
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-42739.63
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>>> present_value(0.07, [109129.39, 30923.23, 15098.93, 29734,39])
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175519.15
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>>> present_value(-1, [109129.39, 30923.23, 15098.93, 29734,39])
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Traceback (most recent call last):
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...
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ValueError: Discount rate cannot be negative
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>>> present_value(0.03, [])
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Traceback (most recent call last):
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...
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ValueError: Cash flows list cannot be empty
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"""
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if discount_rate < 0:
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raise ValueError("Discount rate cannot be negative")
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if not cash_flows:
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raise ValueError("Cash flows list cannot be empty")
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present_value = sum(
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cash_flow / ((1 + discount_rate) ** i) for i, cash_flow in enumerate(cash_flows)
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)
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return round(present_value, ndigits=2)
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if __name__ == "__main__":
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import doctest
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doctest.testmod()
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