Respuesta :
Of the capital budgeting techniques, net present value works equally well with normal and non-normal cash flows and with independent and mutually exclusive projects.
What is net present value?
- The difference between the current value of cash inflows and withdrawals over a period of time is known as net present value (NPV).
- To evaluate the profitability of a proposed investment or project, NPV is used in capital budgeting and investment planning. The outcome of computations to determine the current value of a stream of payments in the future is NPV.
The current value of a future stream of payments from a business, project, or investment is determined using net present value, or NPV. You must predict the timing and size of future cash flows in order to determine NPV, and you must choose a discount rate that is equal to the least allowable rate of return.
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