Operating Cash Flows

Net Present Value (NPV)
Knowledge Center

 
Net Present Value (NPV) > Best Practices

Sign up


Joyce
Student (MBA), United States
What is the NPV of a project that has cost of 52,125 and net cash flows of 12,000 per year for 8 years with a cost of capital of 12 percent? (...) Read more? Sign up for free

  Mukela Namushi Mubano
Accountant, Zambia
 

Operating Cashflows

12,000 x 4.968 (discount factor) = 59,616.
NPV = 59,616 - 52,125 = 7,491
The project could be undertaken since the NPV is positive. However, one should not overlook the qualitative effects of deciding to go ahead with the project.

  KATHRYN STEINER, MBA
Entrepreneur, United States
 

NPV - Question on Calculating Discount Factor

How did you calculate the discount factor of 4.968?

  Mark May
Student (University), United States
 

Calculating Discount Factor

The discount factor is arrived from (p/a, i, n) using compound interest table, where under p/a I = 12, n=8.
Or in Excel =pv(i, n,-1) which is = pv(.12,8,-1) = 4.9676.

  KATHRYN STEINER, MBA
Entrepreneur, United States
 

Caculating Discount Factor

Right, finding the present value. Pv = fvn/(1+1)n
Thanks for the clarification.

  Management Fan
Analyst, Philippines
 

NPV for Capital Budgeting

The IRR is 16% which is higher than the discount factor use - 12%. In addition your payback period is around 4.35 year.

 

More on Net Present Value (NPV)
Summary
Forum
NPV of $1 Million for a Project Means What
WHEN to Invest? Investing at the Right Moment...
Calculating NPV with Missing Data
How do you Calculate NPV when Initial Investments are Unknown?
Example of Net Present Calculation
NPV of Partial Payments
Missed Interest in NPV
NPV assumes Certainty of Cash Flows
Calculating Cost per Unit if Zero NPV without any Operating Costs Information
Calculating NPV for a Project
NPV Cost Avoidance and Savings
NPV for Leased Equipment versus Purchased Equipment
NPV with a Missing Cash Flow Figure
🔥NPV with Only Costs & IRR
Best Practices
Re-evaluating an investment decision
Operating Cash Flows
Does the Net Present Value (NPV) calculation uses cash inflows or profits?
Choosing between Investments Using a Comparison of NPVs
More Complex NPV Comparison: Interrelated Projects
Special Interest Group

Are you interested in Net Present Value (NPV)? Sign up for free

Notify your students

Copy this into your study materials:

and add a hyperlink to:

Link to this discussion

Copy this HTML code to your web site:


Net Present Value (NPV)
Knowledge Center

 


About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2021 12manage - The Executive Fast Track. V15.8 - Last updated: 25-2-2021. All names of their owners.