What is Net Present Value (NPV)?

What is Net Present Value (NPV)?

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Education

Tags:

• Net
• Present
• Value
• (NPV)
• economic
• howto
• educational
• finance
• money
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• fund
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[milton123]

holy shit, spent an hour in a lecture where a PROFESSOR couldn't explain NPV for the life of her. 2 minutes on youtube and i fucking get it.

[qatarrockss]

@milton123 you might not be paying attention in the class room. lol just kidding

[samlau121]

these videos from finance101EC make learning shit so easy

[iNinjaNotes]

@707firedragon yeah. net present value is essentially finding out if the project is profitable after finding what the costs and revenues would be if they were all incurred in the current year. If the project is profitable, they will take it unless they have a more opportunistic project. Net realizable value is an accounting term used to find an asset value minus costs. For example, the net realizable value of accounts receivable is accounts receivable minus allowance for doubtful accounts.

[phandan083]

@707firedragon of course it is! In reality, much more cost and budget to care. Anyway, before you run with a real business, you should understand well wat is NPV (like this ex)!

[mauritianbeachboy]

@deartapan as far as I am concerned, yes. So, not only do you have to calculate the future revenue of the project and take away the cost of the pizza oven but you ALSO have to take away the opportunitycost of having earnt say, 5% revenue if you had put it into a savings account. Thus: Extra revenue from pizza oven - pizza oven cost - opportunity cost of having put all that money into a savings account.

[707firedragon]

i am guessing this is different from net realizable value right?

[deartapan]

I liked it but is discount rate the rate that you could have got for the alternate investment (e.g 6% - assuming that 6% is interest you will receive if you invest in bonds per year and than to compare if the pizza maker investment was worth or not)

[Sy00f]

Good job .. Keep going i like it .. It is easy and simple