Asked by Heather Jenkins on Apr 25, 2024
If in evaluating a proposal by use of the net present value method there is an excess of the present value of future cash inflows over the amount to be invested, the rate of return on the proposal is less than the rate used in the analysis.
Net Present Value
A method used in capital budgeting to assess the profitability of an investment by calculating the present value of all cash inflows and outflows.
Rate Of Return
A financial ratio that calculates the profit or loss of an investment over a specified period, expressed as a percentage of the investment's initial cost.
Present Value
The current worth of a future sum of money or stream of cash flows, given a specified rate of return.
- Explore the relevance of net present value in the consideration of capital investment proposals.
Learning Objectives
- Explore the relevance of net present value in the consideration of capital investment proposals.