Npv or Net Present Value in scientific calculator

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  • Опубликовано: 2 окт 2024
  • Net present value ( NPV ) is the difference between the present value of cash inflows and the present value of cash outflows over a specific period of time. NPV / Net present value is used in capital budgeting and investment planning to analyze the profitability of investment or project.
    A positive net present value indicates that the estimated earnings generated by a project or investment - in present amount - exceeds the anticipated costs, also in present amount. It is assumed that an investment with a positive NPV will be profitable, and an investment with a negative NPV will result in a net loss. This concept is the basis for the Net Present Value Rule, which says that only investments with positive NPV values should be taken.
    Money in now is worth more than the same amount in the future due to inflation, risk and to earnings from alternative investments that could be made during the intervening time period. In other words, a dollar earned in the future won’t be worth as much as one that earned in the present. The discount rate element or cost of fund of the NPV formula is a way to account for this.
    For example, assume that an investor could choose a $500 payment today or in a year. A rational person would not be willing to postpone payment. However, what if an investor could choose to receive $500 today or $550 in a year? If the payer was reliable, that extra 10% may be worth the wait, but only if there wasn’t anything else the investors could do with the $500 that would earn more than 10%. An investor might be willing to wait a year to earn an extra 10%, but that may not be acceptable for all investors. In this case, the 10% is the discount rate which will vary depending on the investor. If an investor knew they could earn 12% from a relatively safe investment over the next year, they would not be willing to postpone payment for 10%. In this case, the investor’s discount rate is 12%. In this calculation we will calculate the present value of all cash inflows considering a discount rate and the we will deduct present value of investment from that amount to get net present value or npv.

Комментарии • 3

  • @ICZ6
    @ICZ6 2 года назад

    Thank you very much that was very helpful

  • @khubaibnusrat4701
    @khubaibnusrat4701 Год назад

    2nd answer is wrong