Interpolation Method of NPV

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

PART -15

8.2           INTERPOLATION METHOD

Especially for capital projects, if the project begin with ( - ) cash flow, then, ( + ) cash flow is seen at the end, the NPV of project can be calculated by using graph which is drawn with this method.

The Advantages & Disadvantages, NPV Method

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

PART -12

7.1           THE ADVANTAGES & DISADVANTAGES, NPV METHOD

Some of the advantages of Net Present Value is as below:

• Evaluation of investment projects, it is important that to consider the time value of money in the calculations. This aspect gives a particular advantage to NPV method.
• NPV method, it has great importance to calculate the discount rate for further calculation that the present value determination.
• To be low or high of this rate affect the decision of the investment projects.
• If this rate is determinated high, large cash inflow investments will be prefered at the beginning years of the project life.
• If this rate is determinated low, Large cash inflow investments will be preferred at the end of the project life.
• The determined and used discount rate at the NPV method is used without changing in the useful life of all revenues.
• However, affecting the determination of pensionable discount; resource cost, profit rate, the interest rate in the economy and so on. factors would be changed in a time. Therefore, for a long period of time with a single discount rate reduction decision-making process can be accurate in some cases blocking properties.
• Each year, with different discount rates to calculate NPV is difficult to estimate as accurately as the rate of discount for each year is also a hassle.
• NPV method of investment projects over a certain discount rate, are intended to maximize the present value.

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