Added an algorithm to calculate the present value of cash flows

financial/present_value.py

@@ -0,0 +1,33 @@
+# Reference: https://www.investopedia.com/terms/p/presentvalue.asp
+
+# Algorithm that calculates the present value of a stream of yearly cash flows given...
+# 1. The discount rate (as a decimal, not a percent)
+# 2. An array of cash flows, with the index of the cash flow being the associated year
+
+# Note: This algorithm assumes that cash flows are paid at the end of the specified year
+
+from typing import list, tuple
+
+
+def present_value(discount_rate: float, cash_flows: list[float]) -> tuple[float, str]:
+    present_value = 0.0
+
+    if discount_rate == -1:
+        return (0, "Invalid discount rate, please choose a rate other than -1")
+
+    for idx, cash_flow in enumerate(cash_flows):
+        present_value += cash_flow / ((1 + discount_rate) ** idx)
+
+    return (
+        present_value,
+        "The present value of the given yearly cash flows at a "
+        + str(round(discount_rate * 100, 2))
+        + "% discount rate is $"
+        + str(round(present_value, 2)),
+    )
+
+
+if __name__ == "__main__":
+    import doctest
+
+    doctest.testmod()