Asked by Zachary Zamborelli on Jul 06, 2024
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What are the assumptions of the net present value technique?
Net Present Value
A financial metric that calculates the present value of net cash flows from an investment, considering the time value of money.
Assumptions
Premises or statements taken as true without proof for the purpose of argument or investigation in analytical or operational processes.
- Comprehend the fundamentals of net present value and its utilization in assessing investment choices.
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Charlotte HarrisJul 10, 2024
Final Answer :
The assumptions of the net present value technique are:
• Interest rates are known for the entire term of the investment.
• Payments are made at the end of each time period.
• Investments with similar net present values are similar in other respects (at least, we make this assumption if net present value is the only method of evaluation of investment used).
• Interest rates are known for the entire term of the investment.
• Payments are made at the end of each time period.
• Investments with similar net present values are similar in other respects (at least, we make this assumption if net present value is the only method of evaluation of investment used).
Learning Objectives
- Comprehend the fundamentals of net present value and its utilization in assessing investment choices.