What is the project's NPV.

Expert Solution

Net present value (NPV) refers to the difference between the value of cash now and the value of cash at a future date.
Net present value in project management is used to determine whether the anticipated financial gains of a project will outweigh the present-day investment — meaning the project is a worthwhile undertaking.
Generally speaking, an investment with a positive NPV will be profitable and therefore given a green light for consideration, while an investment with a negative NPV will result in a financial loss, and may not be undertaken.

Example

To understand how to calculate NPV, first consider the following: Money is worth more now than it is later. So, for example, $1,000 today is worth more than $1,000 in three years. Why? Because you could take that $1,000 today and invest it, earning a modest 4 percent each year. In three years, that $1,000 will be worth $1,124.86. (Note that this does not factor in inflation, which we’ll address momentarily). That means the “present value” of $1,000 after three years of investment is $1,124.86.

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jeff jeffy answered 1 year ago

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