Net Present Value Approach

Question 1

What is net value approach (NPV)

Answer 1

Determines the present value of expected cash inflows and compares that value with the present value of expected outflows in the project

Uses the discount rate (called hurdle rate)- based on WACC

NPV > = Accept project
NPV < 0 = Regject Project

PV Sum (discounted) - Cost of project = If positive then you accept