In the business world, Net present value (or NPV) is one of the most helpful tools available for financial decision making. Usually, NPV is used to estimate whether a certain purchase or investment is worth more in the long run than simply investing an equivalent amount of money in the bank. While it is often used in the world of corporate finance, it can also be used for everyday purposes. Generally, NPV can be calculated as the sum of (P / (1 + i)t) - C for all positive integer values up to t where t is your number of time periods, P is your cash inflow, C is your initial investment, and i is your discount rate. For a step-by-step breakdown, get started with Step 1 below!
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