NPV calculates profitability using all projected cash inflows and outflows, considering time value of money. A positive NPV suggests a profitable project; a negative NPV suggests a loss. NPV's ...

Calculate the present value of each year's cash flow by dividing by (1 + discount rate)^number of years. Sum all present values to find the total value of projected cash flows, which in this example ...

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Net present value and the profitability index are helpful tools that allow investors and companies make decisions about where to allocate their money for the best return. Net present value tells us ...

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Credit: By discounting every future $3,000 cash flow back at a rate of 10%, and subtracting the initial cash outlay of $15,000, we arrive at a net present value of $3,433.70 for this project. Under ...