Login

Create Account
+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
Derive, derive the power in case of rl circuit
derive the power in case of rl circuit
Electronic apu fuel control system in aircraft , Electronic APU fuel contro...
Electronic APU fuel control System in Aircraft : Electronic fuel control emulates the mechanical system, however it provides control in a slightly different way. The electronic
Armature cipl, in which type of armature winding Equaliser ring dummy coils...
in which type of armature winding Equaliser ring dummy coils are used
Core sand, Q.27 Explain the desirable characteristics of core sand. What ar...
Q.27 Explain the desirable characteristics of core sand. What are the normal binders used in core sand ? Types of cores used in foundry. Ans. Core Sand : The core and ma
Damage limits and repair in cold section inspection , Damage Limits and Rep...
Damage Limits and Repair Minor damage to compressor and fan blades may be repaired provided the damage is within the allowable limits established by the manufacturer in the AMM
System architecture and design, The home work is to make an model based sys...
The home work is to make an model based system architecture for an electrical car. in Enterprise Architecture with SysMl language.
Drilling assignment, I need help in doing a project in excel that has ever...
I need help in doing a project in excel that has everything about drilling like mud pump etc ..
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
Risk assement in power system, can we minimize the risk ?
can we minimize the risk ?
Engine fuel control systems  aircraft engine, Engine fuel control systems:...
Engine fuel control systems: The thrust of a turbo jet is controlled by varying the amount of fuel that is burnt in the combustion system and in order to operate the safe tempe
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
IT Courses and Help
ExpertsMind Services
Online Tutoring
Projects Assistance
Exam Preparation
Coursework Help
Programming Courses
Engineering Courses
Why Us ?
~Experienced Tutors
~24x7 hrs Support
~Plagiarism Free
~Quality of Work
~Time on Delivery
~Privacy of Work