Net Present Value (NPV) is the current worth of an income stream in today's currency. It is used to make a decision to proceed with an expenditure, for example: The construction of a new building Proceeding with a new business line Purchase of equipment Net Present value takes into account the time value of money. It uses a discount rate to convert future … [Read more...]
If you were the head of your state's department of transportation, how would you choose between the following expenditures? Repaving a road: A large, one time expenditure which eliminates smaller expenditures for a long time. Filling potholes: A small, one time expenditure which eliminates the need for re-paving today, but the big expenditure is still … [Read more...]
Present value calculations are an essential part of almost every industry. I see projects every day whose economic basis depend on knowing the present value of a stream of cash flow. Unfortunately most of the time projects are justified simply on the basis of having money in the budget and choosing the next project in the priority list. A … [Read more...]
