What is net present value(npv)?Illustrate this method using suitable example.
Answers
Explanation:
the net present value is the essential method for using net
Answer:
Net Present Value (NPV) is the technique of estimating the value of cash inflows and outflows discounted at a specific rate.
In simple words, NPV is the difference between the present value of cash inflows and outflows for a given period. Thus, in the term of capital budgeting and investment, NPV is used to estimate the profits earned from a business. So, it calculates the value of an investment either positive or negative over its entire life discounted to its present.
Explanation:
NPV of all future cash flows can either be positive or negative for the given period. Looking at the popularity of NPV it can be concluded that this technique is widely used to determine the profitability of a business. Therefore, a method like this has a great significance in the subject of finance and accounting. NPV is a globally accepted method used to determine factors like the value of a business, investment security, capital project, etc.