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what is the npv formula. Net Present Value is the present value of all cash inflows and outflows of a project over a period of time. Components and Assumptions of the NPV Computation The formula consists of three different fundamental elements.
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The target rate of return is 12. If n is the number of cash flows in the list of values the formula for NPV is. A positive net present value indicates that the projects rate of return exceeds the discount rate.
T Time period of the investment.
Net present value is a tool of Capital budgeting to analyze the profitability of a project or investment. R Opportunity cost of capital. Net present value NPV is the difference between the present value of cash inflows and outflows of an investment over a period of time. In other words its better to invest your money in project X than to put your money in a high-yield savings account at an interest rate of 15.
