Net present value (NPV): It is the method to evaluate the project feasibility. This method calculates the PV (present value) of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows: N P V = P r e s e n t v a l u e o f c a s h i n f l o w s – P r e s e n t v a l u e o f c a s h o u t f l o w s To choose: The better project using the NPV technique.

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Chapter 11, Problem 11ME

To determine

Concept introduction:

Net present value (NPV):

It is the method to evaluate the project feasibility. This method calculates the PV (present value) of cash inflows and outflows, and then calculates the net present value of the investment. A project should be accepted if it has a positive NPV. The formula to calculate the NPV is as follows:

NPV = Present value of cash inflows – Present value of cash out flows

To choose:

The better project using the NPV technique.

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