0
Want this question answered?
Be notified when an answer is posted
Add your answer:
Earn +20 pts
How do you compute the profitability index of a capital-budgeting proposal?
Dividing the present value of the annual after-tax cash flows by the cost of the project
Why is net present value important to a project?
The net present value of money is a calculation which aims to define today's investment in terms of the value of money in the future. In order to evaluate the sheer financial aspects of a project, sometimes used as a basis upon which to either pursue a project, or drop it, the financial implications may be the deciding factors. The net present value exercise is commonly used simply to show due diligence in evaluating a project. From Wikipedia [edited]: "In finance, the net present value (NPV)of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows. In the case when all future cash flows are incoming and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price. NPV is a central tool in discounted cash flow (DCF) analysis, and is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, finance, and accounting."
When an equipment dealer receives a long-term note in exchange for equipment the present value of the future cash flows received on the notes?
Is credited to sales revenue at the exchange date.
Should you consider depreciation in NPV?
Net present value calculation only considers the cash amounts and depreciation is not cash amount rather the related assets is counted in for net present value calculation. Depreciation is deducted once from net income to calculate the tax amount but after that it is added back.
How do you compute present and future value of a cash flow stream?
Future Value = Value (1 + t)^n Present Value = Future Value / (1+t)^-n
What is the relationship between present value factor and annuity present value factor?
Present value annuity factor calculates the current value of future cash flows. The present value factor is used to describe only the current cash flows.
What is the relationship between the present value factor and annuity present value factor?
Present value annuity factor calculates the current value of future cash flows. The present value factor is used to describe only the current cash flows.
The present value of future cash flows has what relationship to interest rate?
The present value of future cash flows is inversely related to the interest rate.
The present value of the expected future cash flows of an asset represents the asset's?
intrinsic value
Is valuation of a financial asset based on concept of determining the present value of future cash flows?
How is the value of any asset whose value is based on expected future cash flows determined?
What is the meaning of expected net present value?
It is the expected value of all cash flows of a project brought back to the present value, by discounting it by the cost of capital involved in the project.
What is enterprise value?
Enterprise value is the present value of free cash flows a company can generate.Enterprise Value = Market Value of Equity + Debt - Cash
What is a present value calculator?
A present value calculator is a calculator that is used to figure out the future value of something based on constant payments and interest rates. It helps to calculate the present value as well.
Would an annuity value calculator show you the present value of an annuity?
Yes, an annuity value calculator can show you the present value of an annuity. As you may know, the present value of an annuity is the current value of a set of cash flows in the future, based on a specified rate of return.
What is present value analysis?
Present value analysis is a financial technique used to evaluate the value of future cash flows by discounting them back to their current value. It takes into account the time value of money, allowing for better decision-making by comparing the present value of costs and benefits. The goal is to determine whether an investment or project is worth pursuing based on its potential return.
What does the term npv stand for?
The most common use of the acronym NPV is to refer to net present value. Net present value is the sum of the present values of individual cash flows of the same entity.
How much is a business worth?
A business is worth the present value of its future cash flows in perpetuity.
