Net Present Value

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  • NET PRESENT VALUE
    • Step One
      • Multiply each years cash inflow by each years discount factor
        • e.g year 1 cash inflow = 4M
    • Step Two
      • Add all years present value
    • Step Three
      • INITIAL INVESTMENT- TOTAL PRESENT VALUE
        • = NET PRESENT VALUE
  • e.g year 1 cash inflow = 4M
  • Year 1 discount factor = 0.909
    • 4M x 0.909 = 3636000

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