Login

Create Account
Customer Service Chat
+14156709189
info@expertsmind.com
Submit Homework/Assignment
Get quote & make Payment
Get Solution
Net present value method: npv, finance, Other Engineering
Discounted cash flow methods
Net present value method: NPV
It is one of the classic methods of evaluating the investment project. Here each potential projects value is find out its net present value (NPV). This method considers the time value of money and should that cash flow arising at different time differ in value, hence need to find out its present value (Robert Parrino & David s. Kidwell, 2009).
Steps involved in the calculation NPV:
• Find out the cash inflow from a project based on realistic assumption.
• Determine the appropriate discounted rate.
• Calculate the present value of cash inflow based on discounted rate.
• Net present value is calculated by deducting present value of cash outflow from the present inflow (I.M. Pandey, 2005).
Accept Reject rule:
Accept the project if NPV is positive NPV>0
Reject the project if NPV is negative NPV<0 (Robert Parrino & David s. Kidwell, 2009).
Merits of NPV:
• The value of money is considered.
• NPV considers cash flow occurring in the life of the project to calculate its worth.
• This method considers discounting rate to calculate present value of cash flow.
• This method considers the objective of maximizing shareholders wealth (I.M. Pandey, 2005).
Demerits to NPV:
• Difficult to forecast future cash flow as future is uncertain.
• If right discount rate is not considered then it leads to wrong investment decisions.
• It is not suitable when alternative projects with unequal lives exist (I.M. Pandey, 2005).
Posted Date: 2/6/2012 10:32:50 PM  Location : United States
Ask an Expert
Related Discussions:
Net present value method: npv, finance, Assignment Help, Ask Question on Net present value method: npv, finance, Get Answer, Expert's Help, Net present value method: npv, finance Discussions
Write discussion on Net present value method: npv, finance
Your posts are moderated
Write your message here..
Related Questions
Torsional divergence, Torsional Divergence Lets first try to explain a...
Torsional Divergence Lets first try to explain and interpret torsional divergence for the aerofoil structural model physically. An additional figure describing the mechanical s
Information yechnology, what is software engineering
what is software engineering
Electronics Engineering  Digital Circuits, can you help with assignment on...
can you help with assignment on above topic
HELP!!, HELP IN ELECTRONIC...I AM DOING ELECTRONIC ENG. ... GUIDE ME THE WA...
HELP IN ELECTRONIC...I AM DOING ELECTRONIC ENG. ... GUIDE ME THE WAY...
Assignment, 1. Indicate one method for alleviating each of the following pr...
1. Indicate one method for alleviating each of the following problems associate incineration of municipal solid wastes (MSW). (a) Odors from the burning organics (b) Particulate
Fluid (liquid) ice protection systems, FLUID (LIQUID) ICE PROTECTION SYSTEM...
FLUID (LIQUID) ICE PROTECTION SYSTEMS: Liquid ice protection systems can be used as either antiice or deice systems. The system is designed to project a film or fluid over t
Capital structure, how to identify the capital structure?
how to identify the capital structure?
Principles of suveying, the true length of a line is known to be 500m.the ...
the true length of a line is known to be 500m.the line was again measured with a 20m tape and found to be 502m,what is the correct length of the 20m tape.
Surveying, Write short notes on the overcoming the following obstucal with ...
Write short notes on the overcoming the following obstucal with good leblel diagram 1 RIVER 2.BUILDING 3.DAM
System Reliability, One problem
One problem
Assignment Help
Accounting Assignment Help
Economics Assignment Help
Finance Assignment Help
Statistics Assignment Help
Physics Assignment Help
Chemistry Assignment Help
Math Assignment Help
Biology Assignment Help
English Assignment Help
Management Assignment Help
Engineering Assignment Help
Programming Assignment Help
Computer Science Assignment Help
ExpertsMind Services
Online Tutoring
Projects Assistance
Exam Preparation
Coursework Help
Programming Help
IT Services
Why Us ?
~Experienced Tutors
~24x7 hrs Support
~Plagiarism Free
~Quality of Work
~Time on Delivery
~Privacy of Work