Explain those criteria which have been evolved for evaluating the financial desirability of a project
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Net Present Value (NPV).
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Net Present Value
Explanation:
- Net present value is the difference between the current worth of cash inflows and withdrawals over a period of time (NPV).
- The net present value (NPV) is a computation used to estimate the profitability of a proposed investment or project in capital budgeting and investment planning.
- The result of computations to calculate the current worth of a future stream of payments is the net present value (NPV).
- It considers money's temporal value and can be used to evaluate similar investment opportunities.
- The NPV is determined using a discount rate, which may be derived using the project's cost of capital.
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