NPV with Only Costs & IRR

Net Present Value (NPV)
Knowledge Center

Forum

New Topic

Tom Loxton

NPV with Only Costs & IRR

🔥NEW Hi, I have been posed with the problem of trying to calculate an NPV, with only costs provided and an IRR. Additionally, costs are not incurred upfront, but by borrowing over each period at a given rate. Would it be incorrect to go ahead and use the IRR to estimate what the net cash inflows would be based on the cash outflows? So Cost * (1 + IRR) = estimated cash inflow.
Otherwise any input on techniques is appreciated!

  Management Fan
Analyst, Philippines
 

NPV Use for Investment Criteria

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.

Start a new topic

 

More on Net Present Value (NPV):
Summary
Special Interest Group

Do you have a keen interest in Net Present Value (NPV)? Become our SIG Leader

Net Present Value (NPV)
Knowledge Center



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2022 12manage - The Executive Fast Track. V15.8 - Last updated: 18-1-2022. All names of their owners.