NPV with Only Costs & IRR

Net Present Value (NPV)
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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.

 

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