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
Amplitude shift keying, explain the operation of bask
explain the operation of bask
Design of operation sysrem, classification of process technology
classification of process technology
Homework, 1) An investment project requires a net investment of $100,000. T...
1) An investment project requires a net investment of $100,000. The project is expected to generate annual net cash flows of $28,000 for the next 5 years. The firm''''s cost of cap
What is raroc?, What is RAROC? RAROC is a riskadjusted structure for e...
What is RAROC? RAROC is a riskadjusted structure for earnings statistic and earnings control. It is a device for calculating riskadjusted financial efficiency. And it provide
Interlaminar shear strength , Composites have low shear strengths compared ...
Composites have low shear strengths compared to longitudinal strengths. The ILSS test is a simple 3 point bend test, requiring a small amount of material. A span to depth ratio
Lifting wing, Lifting wing FP was run at the conditions corresponding t...
Lifting wing FP was run at the conditions corresponding to AGARD WG07 TEST CASE 11, namely M∞ = 0.84,α= 3.06 deg. The ‘final step' values of the partiallyconservative paramete
Clamping circuit, draw and explain the working of a positive clamping circu...
draw and explain the working of a positive clamping circuit?
Power engine  aircraft maintenance, Power Engine: Power producing engi...
Power Engine: Power producing engines come in two main forms Turboprop and turboshaft. a. Turboprop Engines. Turboprop engines extract most of the energy from the gas stream
Smoke control  fire protection engineering, Smoke control  fire protectio...
Smoke control  fire protection engineering: Smoke control is a complex subject and requires a course of at least one whole week to begin to understand how it is used in build
Power system analysis, I need a project in Load impact in power flow((const...
I need a project in Load impact in power flow((constant power, constant impedance, constant current, induction motor). Report from 3 articles source and simulation in powerworld s
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