Q. What is
Net Present Value?
Each
potential project’s value should be estimated using a discounted cash flow
(DFC) valuation, to find its net present value (NPV). This valuation requires
estimating the size and timing of all the incremental cash flows from the
project. The NPV is greatly affected by the discount rate, so selecting the
proper rate sometimes called the hurdle rate is critical to making the right
decision. The hurdle rate is the Minimum acceptable rate of return on an
investment.
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