What
is Net Present Value? Definition
The Net Present Value (NPV) of an investment (project) is the difference
between the sum of the discounted cash flows which are expected from the investment,
and the amount which is initially invested. It is a traditional valuation
method (often for a project) used in the Discounted
Cash Flow measurement methodology, whereby the following steps are undertaken:
Steps in the calculation of Net Present Value
 Calculation of expected free cash
flows (often per per year) that result out of the investment
 Subtract / discount for the cost of capital (an interest rate to adjust
for time and risk)
The intermediate result is called: Present Value.
 Subtract the initial investments
The end result is called: Net Present Value.
Therefore NPV is an amount that expresses how much value an investment
will result in. This is done by measuring all cash flows over time back towards
the current point in present time.
If the NPV method results in a positive amount, the project should be undertaken.
Limitations of Net Present Value
 Although NPV measurement is widely used for making investment decisions,
a disadvantage of NPV is that it does not account for flexibility / uncertainty
after the project decision. See Real
Options for more information.
 Also NPV is unable to deal with intangible benefits. This inability
decreases its usefulness for strategic issues and projects. See
IC Rating for more information.
Book: S. David
Young, Stephen F. O'Byrne  EVA and ValueBased Management: A Practical Guide..

Book: Aswath Damodaran
 Investment Valuation: Tools and Techniques for Determining the .. 
Book: James R.
Hitchner  Financial Valuation: Applications and Models 
Net Present Value (NPV) Special Interest Group

Special Interest Group (115 members)


Forum about Net Present Value (NPV)


Discussions about Net Present Value (NPV).
🔥 
NEW NPV with Only Costs & IRR
Hi, I have been posed with the problem of trying to calculate an NPV, with only costs provided and an IRR. Additionally, (...)






NPV Cost Avoidance and Savings
I evaluating a capital expenditure project where 'stand alone' (location 1) the savings from the investment are low. Due (...)






Calculating NPV for a Project
John owns a nursery school. He estimates that, with an extension, he would be able to sell the business as a going conce (...)







Best Practices about Net Present Value (NPV)


Here you find the most valuable discussions from the past.
🥈

Operating Cash Flows
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 ca (...)






NPV of Partial Payments
Suppose a business sells an average of $ 1000 per month to a group of 200 customers on Net 30 terms. What would be the (...)







Expert Tips about Net Present Value (NPV)


Here you will find advices by experts.


Information Sources about Net Present Value (NPV)


Here you will find powerpoints, videos, news, etc.

Net Present Value vs IRR NPV vs IRR (...)






Present Value Tables Calculating PV (...)






Capital Budgeting Calculate NPV, IRR, ROC (...)






Business Valuation  Company Valuation  Firm Valuation Business Analysis, Company Analysis  Firm Analysis (...)






Analyzing Financial Feasibility Financial Feasibility Analysis, Project Selection, ROI, NPV, IRR (...)






How to Calculate NPV in MS Excel Basic Understanding of how to use Excel for calculating NPV (...)






Net Present Value Diagram Investment Valuation (...)







Compare with Net Present Value: Internal Rate
of Return  Payback
Period  CostBenefit
Analysis  Total Cost of Ownership
 CAGR 
Cost of Equity
Return to Management Hub: Decisionmaking & Valuation  Finance & Investing
More Management Methods, Models and Theory


Special Interest Group Leader






