Difference between revisions of "Net present value method"
(Created page with "Net present value method (alternatively known as NPV method) is a method that is used to assess the present value of the project's expected future cash flows, discount...") |
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According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | According to [[Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition)]], | ||
:[[Net present value method]] ([[NPV method]]). Used to assess the present value of the project's expected future cash flows, discounted at the appropriate cost of capital. [[Net present value|NPV]] is a direct measure of the value of the project to shareholders. | :[[Net present value method]] ([[NPV method]]). Used to assess the present value of the project's expected future cash flows, discounted at the appropriate cost of capital. [[Net present value|NPV]] is a direct measure of the value of the project to shareholders. | ||
| + | According to [[Cost Accounting by Horngren, Datar, Rajan (14th edition)]], | ||
| + | :[[Net present value method]] ([[NPV method]]). Capital budgeting discounted cash flow (DCF) method that calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time, using the required rate of return. | ||
==Related concepts== | ==Related concepts== | ||
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*[[Introduction to Financial Management]]. | *[[Introduction to Financial Management]]. | ||
| − | [[Category: Financial Management]][[Category: Articles]] | + | [[Category: Financial Management]][[Category: Articles]][[Category: Accounting]] |
Latest revision as of 20:07, 10 July 2020
Net present value method (alternatively known as NPV method) is a method that is used to assess the present value of the project's expected future cash flows, discounted at the appropriate cost of capital. NPV is a direct measure of the value of the project to shareholders.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Net present value method (NPV method). Used to assess the present value of the project's expected future cash flows, discounted at the appropriate cost of capital. NPV is a direct measure of the value of the project to shareholders.
According to Cost Accounting by Horngren, Datar, Rajan (14th edition),
- Net present value method (NPV method). Capital budgeting discounted cash flow (DCF) method that calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time, using the required rate of return.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
