net present value

Question 1

NPV

Answer 1

the present value of future income from an investment project, minus the cost

Question 2

advantages

Answer 2

evaluate likely success of a project
considers total cash flow of a project
takes into account the time value of money
reduces long term impact
decision making mechanism

Question 3

disadvantages

Answer 3

complex calculation (resource heavy)
rate of discount is critical
difficult to select appropriate rate
initial investment affect calculation

Question 4

NPV calculation

Answer 4

present value- capital cost

Question 5

PV calculation

Answer 5

net cash flow x discount rate