Net Present Value

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.