NPV of $1 Million for a Project Means What

      
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		            		C.J.Shah
Sales, United States
			            
NPV of $1 Million for a Project Means What

	          		If a NPV of one project is $1 million, what does it mean to an investor?
				      
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						            	Hennie Stander
Accountant, South Africa
												
				                Meaning of NPV for Investors

													We are taught that if a project shows a positive NPV it should be accepted as it is forecasted that the project will generate a positive inflow of cash over its lifetime after future cash flows have been discounted (assuming ones assumptions are accurate).

However, the $1m NPV should also be looked at as a percentage of the initial outlay and compared in this manner to other projects which the investor might be forced to choose from.
				                
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						            	Management Fan
Analyst, Philippines
												
				                NPV Meaning to an Investor

													Basically it means the project is worth-pursuing. Because the hurdle rate or cost of capital have  already been calculated for the expected cash flows of the project in the future period are dragged to the present period. This gives you the value of the project now.

In addition, because above rate is used, this implies that you will gain in the project for its future cash flows against foregoing if you are going to invest your capital elsewhere (eg. bank, mutual fund, stock market.

To the investor, this is value creation.
				                
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