NPV Use for Investment Criteria
Management Fan, Analyst, Philippines
There should be an incremental cash inflows (future inflows) since you will evaluating the value of such future net cash inflows over pulling the value of each future inflows to the present time hence the formula is FV * (1+r)^(no. of years).
r is the rate used as hurdle rate or cost of capital especially if you can have this rate with an investment elsewhere. NPV should be positive and the IRR should be higher than the rate used. This is incorporating time value of money and capital budgeting. 14-1-2017