Presentation Case 4 handout class

Presentation Case 4 handout class - Cassie Murphy and Neha...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Cassie Murphy and Neha Bedi Presentation Case 4 – Net Present Value (NPV) Mutually exclusive projects when the acceptance to do or participate in one project eliminates the possibility of the other project being accepted or undertaken as well. Net Present Value (NPV) The difference between the initial costs of an investment project, and the sum of current values of projected cash inflows. It calculates future values in today’s dollars. Used to determine whether an investment is likely to offer good returns. Basically, the NPV is higher if: the income amounts (cash flows in) are larger, or if the discount rate is lower. The NPV is lower if the income amounts (cash flows in) are smaller, or if the discount rate is higher Formula: Where: Ct = the net cash flow (the amount of cash, inflow minus outflow) at time t r = discount rate (interest rate) C0 = initial cost of investment t = time of cash flow NPV > 0, then the project is worthwhile pursuing. NPV < 0, it should not be undertaken as it represents a return less than the discount
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Presentation Case 4 handout class - Cassie Murphy and Neha...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online