Jan 10, 20080
Net Present Value (NPV) Part Two
Net Present Value (NPV) Part Two
Before the worked examples, it is important that you read the first part of NPV, as the underlying concepts, and their limitations, are very important. To utilize NPV as a tool for ranking Investments it is important to arrive at a rate at which to discount the estimated future cash flows. In terms of Share purchases, future cash flows are either dividends paid, or increase in share value. The following is a highly simplified example, and care should be taken when arriving at estimates of growth and dividend payments, as well as the rate at which those estimates are discounted.
