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Does the NPV calculation uses cash inflows or profits? Should I use the revenue generated by the project or the profit? (...) Read more? Sign up for free
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Alpin McGregor freeelance, United Kingdom


NPV and Cashflows
NPV and IRR both use cashflows. Profit is not a cashflow. An approximation for cashflow would be profit plus depreciation. Remember this is only an approximation. For capital investment decisions by a firm, the firm will need to prepare cash forecasts anyway (or at least it should do) so the question of using profit or even having to adjust profit for non cash items such as depreciation should not arise.




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