It is a Capital budgeting method where income of investment will be subjected with time value of money.

1. Net Present Value(NPV)
Submitted to Pramod Kumar Partjoshi
Submitted by Simhadri Bhavana-220402100039

2. What do you mean by NPV?
NPV or Net Present Value is how much an investment is worth throughout
its lifetime, discounted to today’s value.
Used in Capital Budgeting and Investment planning.
Difference between present value of cash inflows with outflows over a
period of time.

3. Three Possibilities
Positive NPV
Zero NPV
Negative NPV

4. Method of calculating NPV
• Formula: NPV= Rt/(1+i)^t
Where, Rt= Net cash flow(inflow – outflow)
i = discount rate
t= time period

5. Example:
Find out NPV of Project A & B. i= 10% .
Project A B
0 1000000 1000000
1 325000 300000
2 325000 400000
3 325000 200000
4 325000 300000
The NPV of project A will be 232000 and
Project B will be 122091.
Since the NPV of Project A is higher it will be
accepted.

6. Advantages Disadvantages
 Incorporates time value of
money.
 Helps in Decision making.
× Accuracy depends on inputs.
× No use in comparison of
projects.
× Hidden costs.

7. Thank you
.