The Net Present Value Method (NPV)

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -11

1         7.     THE NET PRESENT VALUE METHOD (NPV)

Especially in the project analysis, NPV is one of the most commonly used methods. NPV method is the difference between the reduced values and a certain rate of reduction of pre-agreed investment expenditures and provided net cash inflows in the life of the project.

According to this method to accept a project, net present value (NPV) must be greater than or equal to zero.

Alternatively, the biggest project in the net present value (greater than or equal to zero provided that) are given priority for the selection of projects.

NPV is obtained from receipt of the sum of all values in the present value method.

Discounted cash flow (DFC) method is aimed to find the cash flow’s NPV.

• Profitable: if the result is positive, it shows that we will get profit.
• Lost: If the result is negative value, it shows that investment expenses will be higher than indicative of returns.

DISCOUNT RATE AT NPV