NET PRESENT VALUE

Net Present Value

Net Present Value

Introduction

A dollar today is not worth a dollar tomorrow. This is the reason we use the effect of time value of money in our investment proposal. Time value of money lets us know what will be the value of our future cash flow in the present time. This is done by discounting the future cash flows at a particular rate of return.

Al-Sarhan Company is considering an investment opportunity for which it has to know the net present value of its future cash flow. Therefore, we are going to calculate the NPV of the investment.

Calculation of ...