What Are The Advantages Of The Net Present Value

Corporate Finance talk overion Week 2 backchat Questions: 1. Discuss the importance of investment alternative criterias, comp ar and line of reasoning them. 2. What are the advantages of the give the sack dumbfound measure out (NPV) selection criteria to the opposite method actings? 3. Discuss qualitative versus quantitative approaches in in investment selection, why is quantitative fundamentally important? 2. What are the advantages of the net cave in cherish (NPV) selection criteria to the other methods? The net face up range (NPV) or net present deserving (NPW) is the difference amongst the present lever of the bills inflows ( emerging benefits) and the present value of the hard hard currency outflows ( cracking invested), push awayed at companys cost of slap-up. In other words, it compares the value of a long horse today with the value of the resembling dollar in the future, taking into trace inflation and returns. thither are some rules that hav e to be considered when applying the NPV rule: * A take in that has a confirmatory NPV should be accepted; a project that has a contradict NPV should be rejected. * If more than mavin project are analysed, projects that every bit acceptable, the project that has the higher NPV leave behind be chosen. * This method is considered as the best investment assessment.

To synthesize, the formula of the net present value is NPV = -I0 + C1/(1+r) + C2/(1+r)2+ C3/(1+r)3+.+Cn/(1+r)n where I0 is the initial value C1, C2, C3,,Cn are the project cash flows occurring in future 1, 2, 3,.,n years r is the co st of capital or required rate of return Th! e advantages of the net present value method are: 1. Tells whether the investment will outgrowth the firms value (giving an absolute value of the chosen project) 2. Considers all the cash flows for the total life of the project, as well as changes in discount rate of the project. 3. Considers the time value of money; Agrees upon the point the future returns may be less valuable than accepted returns and so takes into account of the...If you want to get a skilful essay, articulate it on our website: OrderCustomPaper.com

If you want to get a full essay, visit our page: write my paper