Net present value (npv), Financial Management

Assignment Help:

Net Present Value (NPV) :

In this technique, future cash flows are discounted to the present and then compared with the investment outlay. The basic discount rate is generally the cost of capital to the enterprise.  For ranking the projects along with this procedure, the NPVs of several another projects are compared. Project with highest positive NPV or a project with highest NPV is given highest rank.

Accept-Reject Rule:

In the case of independent projects, if the present value of cash inflows of a project is higher than the present value of investment outlay of the project, it should be accepted. if not, it should be rejected. In the case of equally exclusive projects, a project with highest NPV should be accepted.

Advantages:

  • Where a company has many mutually exclusive projects in hand, this method assists the management to choose the most profitable one.
  • It is simple to catch

Disadvantages:

  • It does not take into consideration the magnitude of the investment outlay and net cash benefits together.

Related Discussions:- Net present value (npv)

What is logistics, What is logistics? Explain the important activities in l...

What is logistics? Explain the important activities in logistics systems. Logistics - meaning . Working of logistics systems - three important activities - Order processing, I

Suggestion regarding Credit limit. Should it be approved or, Suggestion reg...

Suggestion regarding Credit limit. Should it be approved or not, what should be the amount of credit limit that electronics give to Booth Plastics.

Market segmentation of the term structure of interest rates, Define the mar...

Define the market segmentation of the term structure of interest rates. Market segmentation: And also the investors’ expectations regarding future interest rates and thei

Identification the management risk, Identification the management risk: ...

Identification the management risk: The first and most essential aspect of risk management is recognising what events may occur within a business.  It is only when all the poss

Warrant, It is a long-term call option to purchase common stock at a specif...

It is a long-term call option to purchase common stock at a specified price.

Walters and gordon model, Following are the details relating to three compa...

Following are the details relating to three companies which are identical in terms of ''r'' ABC ltd MNC ltd XYZ ltd Cost of capital

Time value of money, Can you help me out on the Time value of money????? ...

Can you help me out on the Time value of money????? I need urgent help on this topic...

Major objective of working capital management, Q. Major objective of workin...

Q. Major objective of working capital management? The major objective of working capital management is to decide the optimum amount of working capital required. Usually managem

Negotiation with bidders, N egotiation You can also negotiate with the...

N egotiation You can also negotiate with the bidders based on the requirements as mentioned below. You can negotiate only with the lowest evaluated responsive and qualified

Define the term- mergers and takeovers, Define the terms- Mergers and takeo...

Define the terms- Mergers and takeovers The terms takeovers and mergers are inter-related. When a company attains the majority of shares of another company, acquired company is

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd