Flashcards in Evaluation and Technique - Net Present Value Approach Deck (2):
Net Present Value
(NPV) is computed as: NPV = present value of cash inflows - present value of cash outflows
Assesses projects by comparing the present value of the expected cash inflows with expected cash outflows of the project
Determined by discounting flows to their present value using firm's cost of capital as discount "HURDLE." PV of expected cash outflows includes initial cash investment in project and subsequent costs of project. If net present value is 0 or positive then project feasible
the net present value method considers the entire period (life) of the project
the net present value method considers the entire period (life) of the project.