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3 cards from this section. Quick, good the night before a test.
Define Discounted Cash Flow (DCF).
What is the purpose of this method?
What does NPV stand for?
It represents the value of money today versus future cash flows.
What does DCF stand for?
Think about the method used for cash flow valuation.
True or False: A positive NPV means you should reject a project.
Consider what a positive value means in context.
Consider an investment which requires an initial outlay of ₹50,000 and is expected to generate cash flows of ₹15,000 each year for 5 years. Calculate the NPV using a discount rate of 10%.
Break down each cash flow and discount it to find the sum!
A project has a cost of ₹100,000 and expected cash inflows of ₹30,000 yearly for 4 years at a 12% discount rate. What is the NPV?
Convert future values to present values to assess viability.
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