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One of the efficiency metrics of Financial Investment defined , defined as a difference between total DCF and Initial Investment
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\mbox{NPV} = - \mbox{DCFI}_0 -+ \mbox{IDCF}_0 = - \mbox{I}_0 + \sum_{i=1}^n \frac{\mbox{RFCF}_i}{(1+r)^i} = \sum_{i=0}^n \frac{\mbox{RFCF}_i}{(1+r)^i} |
where
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| running number of accounting period (usually 1 year) | ||||||||
| discount rate | ||||||||
| free cash flow generated during the |
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- Investment Projects with negative NPV should be rejected
- Investment Projects with higher NPV should have a financing priority over the projects with lower NPV
See also
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Economics / Investment / Financial Investment / Financial Investment Metrics
[ Profitability Index (PI) ] [ Discounted Cash Flows (DCF) ] [ Internal Rate of Return (IRR) ][ ΔNPV ]
[ Production NPV ]