The net present value (NPV) of a project is the sum of the present value of all its cash flows, both inflows and outflows, discounted at a rate consistent with project’s risk. In this expression represent net cash flow in the year t, r is the discount rate and n represent the life of . Chapter 7: Net Present Value and Other Investment Criteria Project evaluation involves: 1- Estimating the cash flows associated with the investment project (ch. 8) 2- Determining the (discount rate, opportunity cost of capital, or the required rate of return) on the project according to its risk level. (FIN). Net Present Value The Net Present Value (NPV) method involves dis-counting a stream of future cash ﬂ ows back to pres-ent value. The cash ﬂ ows can be either positive (cash received) or negative (cash paid). The present value of the initial investment is its full face value because.
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