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NPV Tag

The Pro Readers > Posts tagged "NPV"

Internal Rate of Return (IRR)

  Internal Rate of Return (IRR) The internal rate of return (IRR) is another method investment appraisal other than Net Present Value (NPV). It is the discount rate which makes Net Present Value Zero. The companies have their own target of rate of return on particular projects. If internal rate of return (IRR) is higher or equal to the project rate of return ascertained by the company then project is feasible and should be accepted. If internal rate of return (IRR)is lower than the project rate of return ascertained by the company then the project needs to be rejected.   How to calculate Internal rate...

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Time value of money

    Introduction Time value of money is the basic concept of finance which says that value of money as of today is more than value of money in the future period. To calculate time value of money we have two methods; Compounding Discounting       Time value of money - Compounding Compounding is the estimate of future cash flows that shall arise when any sum of amount is invested at a given interest rate for a given time period. An amount that is invested today is multiplied by compound factor to arrive at future cash flows at specific interest rate. Where: i = interest rate n = number of years   Example 1: A company wants...

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