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NET PRESENT VALUE

6 May, 2015 - 17:10

The net present value is the sum of the discounted future net cash flows minus the initial investment. All proposals with positive net present value are acceptable. When competing alternative proposals are compare, the one with the largest net present value is chosen. An index determined by dividing the total present value of net cash flows by the initial investment is sometimes used instead when comparing project with different size of initial investment.