What Is the Relationship Between Net Present Value and Cash Flows?
Net present value refers to the difference between the present value of future capital (cash) inflows (income) and the present value of future capital (cash) outflows (expenses). Basic indicators of the net present value method in project evaluation. The future capital inflows and capital outflows are converted into the present value according to the present value coefficient of each period of the estimated discount rate, and then the net present value is determined. This expected discount rate is determined by the lowest rate of return on investment of the enterprise. It is the lowest acceptable limit for corporate investment. [1]
Net present value
- Net present value refers to the difference between the present value of future capital (cash) inflows (income) and the present value of future capital (cash) outflows (expenses). Basic indicators of the net present value method in project evaluation. The future capital inflows and capital outflows are converted into the present value according to the present value coefficient of each period of the estimated discount rate, and then the net present value is determined. This expected discount rate is determined by the lowest rate of return on investment of the enterprise. It is the lowest acceptable limit for corporate investment. [1]
- English: The net present value of a project is the present value of current and future benefit minus the present value of current and future costs.
- in
- Net Present Value (NPV) = Future
- NPV indicator reflects project investment
- advantage:
- Considered
- 1.Net present value refers to