Net present value method
Net present value method (alternatively known as NPV method) is a method that is used to assess the present value of the project's expected future cash flows, discounted at the appropriate cost of capital. NPV is a direct measure of the value of the project to shareholders.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Net present value method (NPV method). Used to assess the present value of the project's expected future cash flows, discounted at the appropriate cost of capital. NPV is a direct measure of the value of the project to shareholders.
According to Cost Accounting by Horngren, Datar, Rajan (14th edition),
- Net present value method (NPV method). Capital budgeting discounted cash flow (DCF) method that calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time, using the required rate of return.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
