Discounted cash flow vs npv
[DOC File]Capital Budgeting
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cf = cash flow. n = the number of years the money is discounted. Internal Rate of Return. The discount rate of a capital expenditure where the discounted cash flows equal the expenditure’s original investment, or the discount rate where the NPV is zero. Gives an answer in a percentage. Difficult to do without a calculator.
[DOC File]Seattle Pacific University
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* * * * Net Present Value * * Time Value of Money Summary Discounted cash flow (or present value) analysis is the foundation for valuing assets or comparing opportunities. To use DCF we need to know three things: Forecasted cash flows Timing of cash flows Discount rate (reflecting current capital market conditions and risk) If there are no ...
[DOC File]Slide 1
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The reason for all of the cash flows needing to be of the same risk is the same reason why they all need to be real or all nominal: if you are going to calculate an overall cash flow and then just discount that cash flow, the distributive property says that you are actually discounting each of the component pieces of the overall cash flow at ...
[DOC File]DISCOUNT CASH FLOW ANALYSIS - Babson College
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(1) Net present value (NPV): present value of a project’s cash inflows minus the present value of its costs. The discounted rate is the project cost of capital., where r is the cost of capital, CFt is the cash flow …
Difference Between NPV and DCF | Difference Between
1) NPV uses cash flows and not earnings. (see merits of cash flow above). 2) NPV uses all cash flows of project, doesn’t set artificial cut off date. 3) NPV discounts cash flow properly, doesn’t ignore time value of $$. B. Most commonly used by practitioners. C. Calculation: add up PV of each cash flow and subtract initial investment.
[DOC File]Chapter 1 -- An Introduction To Financial Management
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Net Present Value (NPV) (OCT 2007) NPV is a method which uses DCF techniques. Net Present Value is equal to the difference between the Present Value of the future cash inflows usually discounted at the rate of cost of capital & any immediate cash outflow. A project will be accepted if its NPV is positive& rejected if it is negative.
[DOC File]Chapter 8
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Key Words: Net Present Value, Present Value, Discounted Cash Flow, Capital Budgeting, Discount Rate, Risk Adjusted Discount Rate, Capital Asset Pricing Model. INTRODUCTION. Ryan and Ryan’s (2002) survey indicates that 85% of Fortune 1000 companies use Net Present Value (NPV) 75-100% of the time in making investment decisions.
[DOC File]Chapter 1: Financial Management in Context
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(b) (i) Explain the differences between NPV and IRR as methods of Discounted Cash Flow analysis. (7 marks) (ii) A company with a cost of capital of 14% is trying to determine the optimal replacement cycle for the laptop computers used by its sales team. The following information is relevant to the decision: The cost of each laptop is $2,400.
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